HomeMy WebLinkAbout2016-12-06 Finance Committee Agenda PacketFinance Committee
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December 6, 2016
Special Meeting
Community Meeting Room
6:00 PM
Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in
the Council Chambers on the Thursday 10 days preceding the meeting.
PUBLIC COMMENT
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Call to Order
Oral Communications
Members of the public may speak to any item NOT on the agenda.
Action Items
1. Fiscal Year 2018 General Fund Financial Status and Budget
Development Guidelines
2. Recommendation to the Finance Committee to Recommend That the
City Council Adopt a Resolution to Continue the Palo Alto Clean Local
Energy Accessible Now (CLEAN) Program, Including: (1) for Local Non-
Solar Resources, Utilities Advisory Commission (UAC) and Staff
Supported Updates to a Price of 8.4 ¢/kWh to 8.5 ¢/kWh With no
Capacity Limit; and (2) for Local Solar Resources, Either a 16.5 ¢/kWh
Price That Drops to Avoided Cost at 3 MW Recommended by the UAC,
or a Tiered Pricing Structure That Declines From 16.5c/kWh to Avoided
Cost Over 6 MW Recommended by Staff; and Approval of Associated
Program Rules and Agreements
Future Meetings and Agendas
Adjournment
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City of Palo Alto (ID # 7390)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/6/2016
City of Palo Alto Page 1
Summary Title: FY 2018 Budget Development Status and Guidelines
Title: Fiscal Year 2018 General Fund Financial Status and Budget
Development Guidelines
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff Recommends the Finance Committee review and comment on the budget balancing
policies and strategies recommended by staff to the City Manager to guide the FY 2018 budget
process.
BACKGROUND
By Charter, the City Manager is charged with the responsibility for developing a recommended
annual budget (and managing it during the course of the year). This item is before the Finance
Committee at this time at the request of the City Manager, made during the end of the FY 2017
Budget Review process with the Finance Committee. This discussion is scheduled in keeping
with the City’s commitment to transparency and the necessity to familiarize the Finance
Committee, Council, and community with some of the challenges and decisions the City will
face in the FY 2018 Budget review and approval process.
During the development of the FY 2017 budget, staff provided the Long Range Financial
Forecast (LRFF) to the Finance Committee in December 2015 and to the City Council in April
2016. As shown below, the LRFF projected a $0.6 million deficit for FY 2017, a $0.2 million
deficit in FY 2018, and a $0.1 million deficit in 2020.
Adopted
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Total Revenue $185,672 $193,953 $202,919 $211,814 $218,393 $225,361 $232,916 $241,044 $249,421 $256,757 $265,564
4.5%4.6%9.2%7.6%6.4%6.7%7.0%7.1%6.5%6.5%
Total Expenditures $185,672 $194,594 $203,116 $211,035 $218,469 $225,124 $231,522 $237,091 $242,852 $249,079 $253,506
4.8%4.4%3.9%3.5%3.0%2.8%2.4%2.4%2.6%1.8%
Net One-Time Surplus/(Shortfall)$0 ($641)($198)$779 ($76)$238 $1,395 $3,953 $6,569 $7,678 $12,058
Cumulative Net Operating Margin (One-Time)$31,755
Net Operating Margin $0 ($198)$779 ($854)$313 $1,157 $2,558 $2,616 $1,109 $4,381
Cumulative Net Operating Margin $11,861
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The table above includes a calculation for the net operating margin which reflects the year over
year change of surpluses and shortfalls. With the net operating margin, it is assumed that each
shortfall is addressed completely with ongoing solutions in the year it appears, and that each
surplus is completely expended with ongoing expenditures or transferred to the Capital
Infrastructure Fund.
Subsequent to the release of the LRFF and during the FY 2017 budget process, it became
apparent that the General Fund (GF) was facing a structural financial deficit in FY 2018 that
would require solutions in the FY 2018 budget process. Staff expects tax revenues to grow into
FY 2018 and for the economy to remain strong. In a November 2016 meeting with Steve Levy,
the head of the Center for the Continuing Study of the California Economy, Mr. Levy stated that
we could expect a robust economy to continue for at least the next 18 months and that staff’s
tax revenue projections for that period were reasonable. Despite this positive news, the City’s
General Fund is facing significant financial challenges in FY 2018.
DISCUSSION
At this time, it is expected that the GF will face a deficit ranging from $4 million to $6 million in
FY 2018.
The GF could also realize a deficit of up to $2 million in FY 2019 and either a surplus of up to
$0.5 million or a deficit of up to $1 million in FY 2020. It is possible, however, that if the FY
2018 deficit is erased through systemic changes, the City may expect minor surpluses or a slight
shortfall. The results shown in the table below assume the General Fund Budget Stabilization
Reserve will be maintained at Council’s approved target of 18.5%.
FY 2018 FY 2019 FY 2020
Net One-time
Surplus/(Shortfall)
($4 million to $6
million) ($2 million to $0) ($1 million to
+$500,000)
This short range forecast reflects a need to evaluate programs and to be prudent with
additional resource investments. For example, these figures do not include any base budget
request increases in order to maintain current service levels. Examples include additional costs
due to contractual increases or inflation costs for the acquisition of materials such as library
books.
Prioritizing spending will be important. This begins with containing escalating costs in current
activities as well as an early review of requests adding expense to the base budget. A
containment strategy is necessary to maintain a manageable financial position and to address
future financial challenges such as rising pension, infrastructure and medical costs; unforeseen
program needs; and the inevitable economic downturn. Palo Alto serves a diverse community
with a broad range of unique services that adds to the significant complexity of managing a
balanced budget and healthy long range financial outlook. The demands and conflicts emerging
from our vibrant economy have heightened the intensity of the “Palo Alto Process,” with new
analyses and data generation demands, and deep dives into complex problem solving within an
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engaged public process across a wide range of issues. These forecast figures present staff with
the challenge of prioritizing the growing needs of the City with the long-term sustainability of
these needs.
The sections below provide important background for the challenges ahead.
Economic Environment
At this time, the local, regional and State economies are faring well. According to recent
reports from the Center for Continuing Study of the California Economy’s (CCSCE), jobs grew by
7.3% in the San Francisco metro area and by 7.4% in the San Jose metro area between
September 2015 and September 2016. Unemployment in the State dropped from 6.0% to 5.5%
during the same periodi . Palo Alto’s unemployment rate in August 2016 was an exceptionally
low 2.7%ii. While all state geographic areas have seen material job growth since the Great
Recession, the Bay Area has experienced the highest rate of job increases.
Per CCSCE, in 2015 “The Bay Area led California and the nation with a real (inflation adjusted)
Gross Domestic Product (GDP) gain of 5.8% in 2015.” The state’s gain was 4.1%, while the
nation’s was 2.4%iii. A key support for GDP, consumer spending, was underpinned by higher
income. The state’s Department of Finance reported that “California’s personal income in the
second quarter of 2016 grew by 3.6 percent compared to a year ago, following 4.7 percent
growth in the first quarter.iv”
With unemployment running low and the Silicon Valley economy performing well, Palo Alto’s
station at the epicenter of growth presents both opportunities and challenges.
General Fund Tax Revenue
The economic information above is the foundation for the solid performance turned in by Palo
Alto tax revenues over the past two years. Steady receipts are expected to continue in FY 2017,
FY 2018, and beyond. For all tax revenues, staff projects for FY 2017 a $1.9 million or 1.7%
increase over the FY 2017 Adopted Budget and a $5.9 million or 5.2% revenue increase in FY
2018 over those now projected for FY 2017. Tax revenues constitute over 55% of General Fund
resources. Short of a recession, staff expects tax revenues to continue to climb in FYs 2019 and
FY 2020. Increases in these years adhere to recent trends and reflect historical compound
annual growth rates adjusted for anticipated events. The conclusions drawn in this report
reflect growth in revenues expected for FY 2019 and FY 2020.
SALES TAX
Despite inroads from online retail sales, this source has remained steady. Updated activity and
revenue figures for FY 2017 show probable receipts of $30.3 million or $1.2 million above the
Adopted Budget. Sales taxes are expected to rise to $31.8 million in FY 2018, a 5.0% growth
rate that is consistent with the compound annual growth rate of 4.6% over the past ten years.
Segments contributing to this growth include electronic equipment, restaurants, and auto sales
and leases. Department store sales, however, are experiencing declines. Staff has incorporated
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lower Stanford Hospital construction use taxes in its tax estimates. For FYs 2019 and 2020 the
average growth rate during this time is estimated at around 3 percent.
PROPERTY TAX
Palo Alto property tax revenues have continued to climb. They have risen from $34.1 million in
FY 2015 to $36.6 million in FY 2016 and are now projected to grow to $39.1 million in FY 2017
and to $41.5 million in FY 2018. The increase from FY 2017 to 2018 equals 6.3% or $2.5 million.
The 6.3% growth rate is in sync with the growth rate over the past 15 years and is used to
project revenues for FYs 2019 and 2020. Staff estimates for FY 2017 include excess ERAF funds,
albeit at a lower level than the past two years.
It is too early to detect a trend, but information is emerging that the robust rise in residential
prices may be moderating somewhat. Multiple bids for homes and offers above the asking
price are decreasing for high end homes.
City staff meets with the County quarterly to obtain the latest data and estimates of “in-the-
fiscal-year” tax revenue. Over the past half-dozen years, County data and projections have
proven reliable. Staff uses the County information and local assessment data to produce its
forecast of property tax revenues.
TRANSIENT OCCUPANCY TAX (TOT)
TOT receipts are brisk, especially with the recent addition of the Hilton hotels, the Clement on
El Camino Real, and the upgrade of the Quality Inn into the Nest. Revenues moved upward
from $16.7 million in FY 2015 to $22.4 million in FY 2016. TOT for Fiscal Year 2017 is expected
to reach $23.9 million, $0.7 million above the Adopted Budget. Projections for FY 2018 stand at
$24.8 million, 3.7 percent or $0.9 million above the estimate for FY 2017. Average occupancy
rates through the first three months of this FY are running at 84 percent compared to 79
percent in the same prior year period. During these periods, room rates have increased from
$249 to $258 per day. Staff has assumed a growth rate of around 4 percent per year for FYs
2019 and 2020.
UTILITY USER'S TAX (UUT)
The UUT is levied on electric, gas, and water consumption, as well as on telephone usage. In
total, Fiscal Year 2017 revenues are estimated at $13.0 million and in Fiscal Year 2018 at $13.9
million.
UUT telephone revenues rose from $3.3 million in FY 2015 to $4.6 million in FY 2016. This
occurred despite the voter approved 0.25% decrease to a 4.75% rate. Without data from
providers to understand this steep increase, staff is projecting, somewhat conservatively, $4.0
million in FY 2017 and $4.2 million in FY 2018. Growth rates for FYs 2019 and 2020 are around
3.5 percent per year.
UUT revenue from Utility sales came in at $7.9 million in FY 2016 and is anticipated to reach
nearly $9.0 million in FY 2017. Rate increases of 11% for electric, 8% for gas, and 6% for water
are the chief drivers of the revenue growth. This source is expected to rise to $9.7 million in FY
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2018. Revenue projections from this source are based on the Utility department’s five year
forecast.
DOCUMENTARY TRANSFER TAX
In FY 2015, documentary transfer taxes reached an all-time high of $10.1 million. This
milestone was a consequence of several large commercial transactions on Page Mill Road and
in the Stanford Research Park. Since that time, transfer taxes have returned to more “normal”
levels such as the $6.3 million earned in FY 2016. Given that revenue from July through
October this FY is running nearly 11 percent below the same period in FY 2016, staff will likely
modify the Adopted Budget at midyear from $6.8 million down to $6.1 million. For FY 2018 a
slight uptick to $6.3 million is estimated.
As in past years, this revenue source is challenging to forecast since it is highly dependent on
sales volume and the mix of commercial and residential sales. For example, even though
transactions through October (166) are running higher than those through October of last year
(148), the value of each transaction has dropped. This likely confirms that the red hot Palo Alto
housing market is cooling off somewhat and that “lower end” properties are being purchased.
In addition, data from this FY and the latter half of last FY indicates that there have been few to
no commercial sales.
SUMMARY
The strong performance in sales, transient occupancy, and the telephone user taxes bode well
for FY 2018 and there are no indications of an economic slowdown at this time. Overall, tax
revenues are expected to grow between 4 to 5 percent per year during the period of FY 2017
through FY 2020, a rate of growth tracking with those experienced in prior years. Very
preliminary data on residential transaction values could be indicative of slower growth to come
in property taxes. This, along with a prolonged economic recovery merits close monitoring and
a prudent spending plan.
Expense Assumptions
During development of the FY 2017 Adopted Budget, it became clear that expense additions to
the budget would have ongoing financial implications and lead to a structural financial deficit in
FY 2018. These additions included, for example:
Shifting the Project Safety Net Program into the General Fund (approximately $2 million
annually)
Growing salary and benefit costs consistent with market conditions and new labor
agreements approved in April 2016
A reduction in contract payments received from Stanford University for Fire services
(approximately $2 million annually)
A reallocation of electricity costs associated with City streetlights and traffic signals
(approximately $2.3 million annually)
A significant increase in tree trimming contractual costs (approximately $1.1 million)
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A realignment of staffing in Development Services between development and non-
development related activities.
The Finance Committee, Council and staff agreed to solve these ongoing costs with one-time
solutions in FY 2017. One-time balancing actions approved in FY 2017 included the deferral of
three capital projects ($4.3 million in savings) and the draw on internal services funds such as
the Workers’ Compensation Fund and General Liabilities fund ($3.1 million in savings). The first
step toward accomplishing this goal was to return to the Finance Committee to discuss ongoing
solutions.
The FY 2018 projected deficit is predicated on a number of assumptions consistent with prior
City Council direction from the FY 2017 Adopted Budget and various actions taken by Council
since the budget was adopted. In developing the FY 2018 expense forecast, one-time, FY 2017
expenditures have been eliminated and major cost elements such as salary and benefits have
been increased. Major expense assumptions include:
Updated salary and benefits: Salaries have been updated to reflect current staffing levels
which include both step increases consistent with applicable MOUs and merit increases for
management and professional employees.
In addition, for those labor units with active contracts, approved salary and benefits
increases have been included. Where labor negotiations are continuing, projected salary
and benefits reflect the current status of negotiations. When current contracts expire, a
two percent increase has been applied.
Pension: In August 2016, CalPERS published its valuation reports as of June 30, 2015
including updated pension employer rates for the Miscellaneous Plan (30.2%) and Safety
(49.7%). Both Miscellaneous Plan and Safety plans saw year over year increases from FY
2017 rates of 28.9 % and 45.4%, respectively. FYs 2019 and 2020 are based on the most
current CalPERS valuation, however, recent salary increases, especially for public safety
units, have not been factored into the CalPERS valuation used in developing this report.
It should be noted that recent negotiations with various labor groups resulted in contracts
which increase the employee share of pension contribution (“CalPERS Member
Contribution”) to include a portion of the employer share over the term of the agreements
(some up to 3% of the employer share). Currently, Palo Alto Police Officers’ Association
(PAPOA), International Association of Firefighters’ Union Local 1319 (IAFF), Service
Employees’ International Union Local 521 (SEIU) and Palo Alto Police Management
Association (PAPMA) all include this change.
Allocated Charges: Revised allocated charges for services provided to the General Fund
departments such as utilities services for gas and water and the corresponding rate
increases.
Annualized major budget changes approved either in the FY 2017 Adopted Budget or by
City Council since June 2016:
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o Revised golf course estimated revenues and expenses to align with the estimated
reopening in the fall of 2017. These adjustments include final payments on the
initial golf course debt as well as forecasting the new debt payments anticipated to
begin in FY 2019. Subsidies by the General Fund are assumed for FYs 2018 and 2019.
o Eliminated one-time expenses added to the FY 2017 Adopted Budget such as the
Sustainability and Transportation and Planning reserves; startup costs for the new
Residential Preferential Parking program; and Urban Forests program costs.
o Revise the annual cost for Trackwatch guards per the revised contract terms
approved in November 2016.
o The City and Stanford University continue to discuss the provision of fire services to
Stanford since the receipt of a Notice of Termination letter from Stanford with the
intent to terminate the contract with the City. This forecast assumes the
continuation of the contract for the current contract value.
Over the course of the last year, a number of variables have changed from those used in the
development of the FY 2017-2026 Long Range Financial Forecast as discussed earlier in this
report. However, despite these variations, overall, the revised salary and benefits figures are
approximately within 1% of the levels reported in the FY 2017-2026 Long Range Financial
Forecast
General Fund Budget Stabilization Reserve Status
The General Fund Budget Stabilization Reserve (BSR) ended FY 2016 at $51.6 million,
approximately $7.7 million above levels expected in the FY 2017 Adopted Budget. Since
adoption of the FY 2017 budget, however, budget adjustments or draws on the BSR approved
by Council have equaled $2.1 million. Of this amount, approximately $1.1 million are ongoing
expenses that were folded into the FY 2018 forecast figures. As of November 30, 2016, the
estimated BSR level is at $42.3 million or 21.8% of the FY 2017 Adopted Budget expense in the
General Fund. This reflects $6.4 million above the 18.5% Council directed target.
Potential Additional Implications
The projections outlined in this report reflect the best information available at this time. There
are a number of looming impacts to the FY 2018 budget and beyond. Some of these are
known, but the amount and timing of them is somewhat uncertain. For a comprehensive list of
fiscal challenges not assumed in this truncated forecast see Attachment A.
Labor negotiations: The current MOUs with the majority of labor units including Palo Alto
Police Officers Association (PAPOA), International Fire Fighters Association (IAFF), Services
Employees International Union (SEIU), and Police Management Association end by
December 2018.
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Pension costs: Due to various CalPERS assumptions, namely the current assumed rate of
return of 7.5 percent and the recent poor performance of CalPERS investment returns,
significant increases in annual contributions are expected in the near future.
Unfunded pension/medical liabilities: The most recent CalPERS valuation report indicates
the continued magnitude of the unfunded pension and medical liabilities. These liabilities
are compounded by the lack of the expected 7.5% annual investment return. Staff is
exploring options to address the liability such as implementation of a Section 115 Trust
Fund which will be brought forth to the Council shortly. Council approved $2.1 million in
General Fund proceeds to be set aside to establish the trust.
Master Plan / Comprehensive Plan: A number of master plan activities are or soon to be
underway. Examples are: the Parks & Recreation Master Plan, Cubberley Community
Center Master Plan, and Comprehensive General Plan. These plans may have additional or
new costs. In many cases, the implementation costs of these plans could be significant and
are generally not funded.
Capital Infrastructure Plan: In June 2014, the Infrastructure Plan was approved by the City
Council and contained $125.8 million in projects. The Plan’s construction and design costs,
however, were based on data from 2012. Costs such as those for the Public Safety Building
have escalated significantly since the original estimates as they likely will for other
infrastructure and capital projects. In addition to rising capital costs, ongoing operating
impacts for new facilities have not been reflected.
Financing, an important component of the Infrastructure Plan, is likely to cost more as a
consequence of plans by the Federal Reserve to raise interest rates. A 0.25 percent increase
is expected in December 2016 and rates are likely to rise again in CY 2017.
Transportation Demand Management: Costs are unknown at this point, but with ongoing
traffic issues locally and in surrounding areas expenses are expected to increase. Passage
of Santa Clara County VTA’s Measure B is helpful, but this could result in additional costs
related to or in addition to VTA projects.
Acquisition of new properties: Though no firm purchases have been made to date, the
potential for purchasing new properties such as the Post Office are under consideration.
City Owned Assets operated by Non-profits: The financial needs of non-profits are ongoing.
This forecast does not include any additional funding for the Avenidas Senior Center, the
Palo Alto History Museum, the Ventura Child Care Center, or the Junior Museum and Zoo.
This Forecast assumes a steady growth in the local economy, but events such as a trade war or
a recession could undermine this outcome. Past recessions such as the Dot.Com bust and the
Great Recession had severe impacts on economically sensitive revenue sources such as sales,
transient occupancy and documentary transfer taxes. During the Dot.Com recession sales taxes
fell by $7.7 million or a cumulative 32 percent over two years. Likewise, hotel tax revenues
dropped by 4.0 million or by nearly 50 percent over two years. Oddly, the Great Recession had
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a lesser, but still weighty result. Over a two year period sales taxes fell by $4.5 million or by
nearly 22 percent; hotel revenue dropped by $1.1 million or by 14 percent; and the transfer tax
revenue fell by $2.3 million or 43 percent. As an example, a 20 percent drop in sales and
transient occupancy taxes in projections for FY 2019 results in a $9.4 million decreases in
resources.
Ongoing Balancing Solutions
During the FY 2017 Budget Hearings, at the behest of the City Manager, the Finance Committee
and City Council directed staff to return to the Finance Committee in CY 2016 to discuss the FY
2018 financial outlook and budget process. With an anticipated deficit of $4 million to $6
million, it is imperative that policy and program priorities are considered in the context of
funding availability and implications for the City’s future financial viability.
Staff has developed a set of guidelines and strategies. These are designed to establish a high
level framework for the FY 2018 budget process and future investments in the organization.
Per the City’s Charter, it remains the City Manager’s responsibility to develop and propose a
budget for Council’s review. Therefore, the attached document outlines guidelines to assist the
City Manager in this annual process. They memorialize a number of priorities and frameworks
already employed by the City Manager’s Office and the Office of Management and Budget in
the annual budget process and are intended to ensure prudent fiscal planning.
FY 2018 Budget Balancing Strategy Guidelines
1. Develop a budget that balances the City’s delivery of the most essential services to the
community with the resources available.
2. Balance ongoing expenditure needs with ongoing revenues to ensure no negative
impact on future budgets and to maintain the City’s high standards of fiscal integrity and
financial management. Maintain adequate reserves to cover any budgetary shortfalls in
the following year as a stopgap measure if necessary.
3. Focus on business process redesign in order to improve employee productivity and the
quality, flexibility, and cost-effectiveness of service delivery (e.g., streamlining,
simplifying, reorganizing functions, and reallocating resources).
4. Explore alternative service delivery models (e.g., partnerships with the non-profit,
public, or private sector for out- or in-sourcing services) to ensure no or minimal service
overlap, reduce and/or share costs, and use our resources more efficiently and
effectively.
5. Analyze non-personal/equipment/other costs, including contractual services, for cost
savings opportunities. Contracts should be evaluated for their necessity to support City
operations and to identify negotiation options to lower costs.
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6. Explore redirecting and/or expanding existing revenue sources and/or adding new
revenue sources.
7. Establish a fee structure to assure that operating costs are fully covered by fee revenue
or have a Council approved policy with any exceptions. In addition, explore
opportunities to establish new fees for services, where appropriate.
8. Identify City policy changes that would enable/facilitate service delivery changes or
other budget balancing strategies.
9. If additional resources become available use existing reserve policies to allocate funds.
10. Prioritize resource additions and seek to propose offsetting reductions to ensure a net
zero change to a budget.
TIMELINE
Over the course of the next six or so months, the staff will work to refine these forecast
estimates and develop a City Manager’s Proposed Budget for both Operating and Capital to be
presented to the Council in late April. FY 2018 Budget Hearings with the Finance Committee
are tentatively scheduled for the first three weeks in May with final Council consideration and
adoption of the FY 2018 Adopted Operating and Capital budgets in June. If there are service
level reduction proposals or a change in service delivery, staff will have stakeholder meetings to
discuss impacts and solicit input.
RESOURCE IMPACT
No new implications are anticipated this Fiscal Year as a result of the actions recommended in
this report. Financial implications from this report and input from the Finance Committee will
be considered in the City Manager’s development of the Proposed FY 2018 budget.
Attachments:
Attachment A: Additional Potential Financial Impacts on the General Fund (PDF)
i CCSCE September 2016 Jobs Report
ii State of California Economic Development Department data cited in “Palo Alto Patch” article of August
25, 2016
iii CCSCE September 2016 “The Bay Area Led Broad Regional GDP Growth Surge in 2015”
iv California Department of Finance’s October 16 “Finance Bulletin”
ATTACHMENT A
Additional Potential Financial Impacts on the General Fund
(as of November 2016)
1
There are a number of looming impacts to the FY 2018 and beyond financial forecast are not included in
current projections. Some of these are known, but the amount and timing of them is somewhat
uncertain.
NEAR TERM
•Labor agreements end by December 2018, new agreements will need to be negotiated for FY 2019
and beyond. Both contractual costs for negotiations as well as changes in labor costs may result.
•Employee attraction & retention at all evels in the organization including an anticipated need for
executive level recruitment (approximately $40k per recruitment) due to continued retirements of
senior level staff.
•New or the expansion of existing projects and programs on the horizon which are not sufficiently
resourced. Examples include: performance measurement and management; sustainability goals and
initiatives; transportation initiatives such as the Transportation Demand Management (TDM) and
any matching City contribution; acquisition of a new Enterprise Resource Planning system (ERP); and
elections costs ($150,000 to $400,000 per election).
•Litigation activities drives increased outside counsel costs and could result in significant judgements
and/or settlements.
•Capital Infrastructure Plan continues to see a significant escalation in project costs
Construction and design costs were based on data from 2012, therefore, costs such as those
for the Public Safety Building have escalated significantly since the original estimates;
Ongoing operating impacts for new facilities such as the Junior Museum and Zoo have not
been accounted for; and
Financing of the Infrastructure Plan is likely to cost more as a consequence of plans by the
Federal Reserve to raise interest rates.
•New capital projects not currently included in the FY 2017-2021 Adopted Capital Improvement
Program:
Trackwatch Camera System (IDS) approx. $2m to $3m
Animal Care Services facility
Junior Museum and Zoo
Lucie Stern Phase II
Roth Building
Remodel of existing City facilities due to the relocation of staff to new buildings such as new
public safety building
•Acquisition of new property such as the Post Office that are currently under consideration, though
no firm purchases have been made to date.
•Master / Comprehensive Plan activities are or shall be underway. These plans may have additional
or new costs. In many cases, the implementation costs of these plans could be significant and are
generally not funded.
Parks and Receation
ATTACHMENT A
Additional Potential Financial Impacts on the General Fund
(as of November 2016)
2
Comprehensive General Plan (currently adding a 6th scenario costing an additional $530,000)
Cubberley Master Plan
•Economic downturn locally or nationally
LONG TERM
•Rising annual pension and healthcare costs are anticipated due to various CalPERS assumptions, the
current rate of return of 7.5 percent and the recent poor performance of CalPERS investment
returns, significant increases in annual constributions are expected in the near future.
•Unfunded pension and reitree medical liabilities are outlined in the most recent CalPERS valuation
report and these liabilities are expected to compound by the lack of the expected 7.5 percent
annual investment return. Both the miscellaneous and safety plans are below 70 percent funded.
•New capital projects not currently included in the FY 2017-2021 Adopted Capital Improvement
Program:
7.7 acres of land owned by the City in the foothills
ITT Site
Byxbee Park Improvements
•Cadillac Healthcare Federal Excise Tax with and expected impact in CY 2020
City of Palo Alto (ID # 7438)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/6/2016
City of Palo Alto Page 1
Council Priority: Environmental Sustainability
Summary Title: Palo Alto CLEAN Program Updates
Title: Recommendation to the Finance Committee to Recommend That the
City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy
Accessible Now (CLEAN) Program, Including: (1) For Local Non-Solar
Resources, Utilities Advisory Commission (UAC) and Staff Supported Updates
to a Price of 8.4 ¢/kWh to 8.5 ¢/kWh With No Capacity Limit; and (2) For
Local Solar Resources, Either a 16.5 ¢/kWh Price that Drops to Avoided Cost
at 3 MW Recommended by the UAC, or a Tiered Pricing Structure that
Declines from 16.5c/kWh to Avoided Cost Over 6 MW Recommended by
Staff; and Approval of Associated Program Rules and Agreements
From: City Manager
Lead Department: Utilities
Recommendation
The Utilities Advisory Commission (UAC) requests that the Finance Committee recommend that
the City Council adopt a resolution (Attachment A) to:
1. Continue the Palo Alto CLEAN program price for local solar energy resources at the
current price of 16.5 cents per kilowatt-hour (¢/kWh) for a 20-year or 25-year contract
term up to the current 3 MW program capacity limit, and for any capacity over 3 MW,
reduce the price to the avoided cost of such energy (currently 8.9 ¢/kWh for a 20-year
contract term, or 9.1 ¢/kWh for a 25-year contract term); and
2. Raise the Palo Alto CLEAN program price for local non-solar eligible renewable energy
resources to the updated avoided cost of such energy (8.4 ¢/kWh for a 20-year contract
term, or 8.5 ¢/kWh for a 25-year contract term), from the prior price (8.1 ¢/kWh for a
20-year contract term, or 8.2 ¢/kWh for a 25-year contract term), and to remove the
program limit of 3 MW for local non-solar eligible renewable resources.
Staff requests that the Finance Committee recommend that the City Council adopt a resolution
(Attachment B) to:
City of Palo Alto Page 2
1. Establish a tiered schedule for the Palo Alto CLEAN program price for local solar energy
resources as follows:
a. For the first 3 MW, maintain the current price of 16.5 cents per kilowatt-hour
(¢/kWh) for a 20-year or 25-year contract term;
b. For the next (fourth) MW, reduce the price to 14 ¢/kWh for a 20-year or 25-year
contract term;
c. For the next (fifth) MW, reduce the price to 12 ¢/kWh for a 20-year or 25-year
contract term;
d. For the next (sixth) MW, reduce the price to the greater of the avoided cost or
10 ¢/kWh for a 20-year or 25-year contract term; and
e. For any capacity over 6 MW, reduce the price to the avoided cost of such energy
(currently 8.9 ¢/kWh for a 20-year contract term, or 9.1 ¢/kWh for a 25-year
contract term); and
2. Raise the Palo Alto CLEAN program price for local non-solar eligible renewable energy
resources to the updated avoided cost of such energy (8.4 ¢/kWh for a 20-year contract
term, or 8.5 ¢/kWh for a 25-year contract term), from the prior price (8.1 ¢/kWh for a
20-year contract term, or 8.2 ¢/kWh for a 25-year contract term), and to remove the
program limit of 3 MW for local non-solar eligible renewable resources.
In addition, staff requests that the Finance Committee recommend that the City Council
approve the attached amended CLEAN program Power Purchase Agreement (PPA) (Attachment
C) to implement the recommended changes to the contract rates in Exhibit PPA-A.
The two resolutions included as part of this Staff Report incorporate the above
recommendations (Attachment A for the UAC recommendation and Attachment B for the staff
recommendation). The amended Palo Alto CLEAN Eligibility Rules and Requirements, which
implement the above recommendations, are shown in Exhibit A-1 and Exhibit B-1 attached to
each resolution. As noted above, the amended PPA (Attachment C) included with this staff
report, incorporates the above recommendations to the contract rates in Exhibit PPA-A.
Council has previously delegated authority to the City Manager to make additional changes to
the CLEAN Program PPA that are approved by the City Attorney’s office as may be otherwise
necessary to implement the recommendations that are approved by Council. The attached
resolutions continue this delegation of authority.
Executive Summary
In March 2012 the Council adopted the Palo Alto CLEAN program (also commonly referred to as
a feed-in tariff, or FIT, program). The program was designed to address the Long-term Electric
Acquisition Plan (LEAP) objective to enhance supply reliability through the pursuit of local
generation opportunities, and to complement the City of Palo Alto Utilities’ (CPAU’s) existing PV
Partners solar rebate program. Palo Alto CLEAN created an additional alternative for property
owners by enabling them to build a new solar system on their property and sell the energy to
CPAU under a long-term, fixed-rate, standardized contract rather than use the energy on site.
City of Palo Alto Page 3
Though solar developers expressed interest in Palo Alto CLEAN in 2012, the initial contract price
(14 ¢/kWh for a 20-year term) proved insufficient to facilitate the most common business
model used by project developers, which involves a third-party investor leasing roof space from
a property owner. Council increased the Palo Alto CLEAN price to 16.5 ¢/kWh in December
2012, and has maintained it at that level ever since (last reaffirming it in March 2016). In May
2015, Council added a 25-year contract term option, and expanded the program to include non-
solar eligible renewable energy resources, setting their contract prices at the avoided cost level.
Although at the start of the year it had just received its first project application, the CLEAN
program appears to be about to reach the 3 MW program capacity limit for solar resources. In
the first two months of this year, Komuna Energy executed CLEAN contracts for five projects
that would account for about 1.4 MW of capacity. And staff has received word from one of the
City’s large commercial customers that it plans to submit an application for a CLEAN project
that could consume the remaining 1.6 MW of program capacity—and potentially more than
that amount. The customer is awaiting Council determination of the CLEAN price for any
capacity over the 3 MW cap before finalizing the size of a system for which it would submit a
CLEAN program application.
At its November 2 meeting, the UAC voted to recommend that all solar capacity installed under
the CLEAN program in excess of the 3 MW program cap—including that portion of the large
commercial customer’s system that exceeds the cap—be compensated at the avoided cost for
such energy. However, staff recommends that all solar capacity installed under the CLEAN
program in excess of the 3 MW program cap be compensated according to a tiered schedule
that gradually reduces the CLEAN price for solar energy to the avoided cost of that solar energy
after the program has 6 MW of installed capacity.
Both staff and the UAC agree that the CLEAN price for non-solar project remain at the avoided
cost amount, which would increase from the current price of 8.1 ¢/kWh and 8.2 ¢/kWh for a
20-year and 25-year contract term, respectively, to 8.4 ¢/kWh and 8.5 ¢/kWh for a 20-year and
25-year contract term, respectively.
Background
CPAU has a long history of supporting solar power. It initiated the PV Partners program in 1999
to provide rebates to residential and commercial customers who install solar for their own use,
and in 2007 the program was expanded to meet the requirements of the State’s Million Solar
Roofs Bill (Senate Bill 1 (SB1), 2006). CPAU was mandated by SB1 to offer rebates through the
PV Partners until the total SB1 program budget of $13 million was exhausted, which occurred in
April 2016, when all rebate funds for commercial solar PV systems were reserved. All residential
rebate funds were reserved as of August 2014.
In March 2012, the City expanded its support for local distributed generation by launching Palo
Alto CLEAN (Clean Local Energy Accessible Now) with a price of 14 ¢/kWh for a 20-year contract
City of Palo Alto Page 4
(Staff Report 2548, Resolution 9236). The program, which was set to expire in December 2012,
expanded the options available to property owners by enabling them to sell energy directly to
CPAU under a standardized long-term contract instead of using the energy on site. After
receiving no response to the program, in December 2012, Council extended the CLEAN program
and increased the rate to 16.5 ¢/kWh for a 20-year contract (Staff Report 3316, Resolution
9308). In February 2014, Council extended the CLEAN program again at the rate to 16.5 ¢/kWh
for a 20-year contract, and increased the program capacity limit to 3 MW (Staff Report 4378,
Resolution 9393).
In April 2014, the City Council adopted the Local Solar Plan (Staff Report 4608, Resolution
9402), which set the overarching goal of meeting 4% of the City’s total energy needs from local
solar by 2023 and unified the City’s approach toward local solar and described a set of diverse
strategies for meeting the 4% target in a cost-effective manner that does not create a burden
on non-solar customers. Prior programs, incentives, and policies involving solar installed in the
City—including specifically PV Partners, net energy metering, and Palo Alto CLEAN—are
integrated into the Local Solar Plan strategies. The 3 MW of solar PV expected from the CLEAN
program plays an integral role in achieving the Local Solar Plan goal, contributing about 0.5% of
the City’s total energy needs.
In May 2015, the Council voted to: extend the CLEAN program again at the rate of 16.5 ¢/kWh
for a 20-year contract for solar resources; add a 25-year contract term option at the same rate;
and expand the program to include non-solar eligible renewable energy resources—setting
contract prices for such resources at the level of their avoided cost, which at the time was 9.3
¢/kWh for a 20-year contract or 9.4 ¢/kWh for a 25-year contract, and setting a separate 3 MW
program capacity limit on such resources (Staff Report 5849, Resolution 9552). In March 2016,
after the Finance Committee voted unanimously to reduce the contract rate for solar resources
to the avoided cost level (8.9 ¢/kWh for a 20-year contract or 9.0 ¢/kWh for a 25-year contract),
the Council voted to continue the CLEAN program again at the rate of 16.5 ¢/kWh for solar
resources (Staff Report 6641, Resolution 9618). At the same time, Council also voted to reduce
the price for local non-solar eligible renewable energy resources to the updated avoided cost
estimate for such energy (8.1¢/kWh for a 20-year contract term, or 8.2¢/kWh for a 25-year
contract term) and continue with a separate program limit of 3 MW for local non-solar eligible
renewable resources.
The energy generated by 3 MW of local solar projects will supply about 0.5% of the City’s total
electricity needs. Table 1 below shows the history of the Palo Alto CLEAN price since the
program began as well as the rate impact of the CLEAN price based on the difference between
the price and the avoided cost of local solar generation.
City of Palo Alto Page 5
Table 1 – History of Palo Alto CLEAN Program Prices and Avoided Cost for Local Solar
Council
Approval
Avoided Cost of Local
Solar Generation *
(¢/kWh)
CLEAN Price
(¢/kWh)
Annual Excess
Cost
(Rate Impact)
Total Excess
Cost over 20-
year Term
March 2012 13.6 14.0 $15,000 (0.01%)
for 2 MW cap $300,000
December 2012 11.6 16.5 $160,000 (0.10%)
for 2 MW cap $3.2 million
February 2014 9.9 16.5 $332,500 (0.27%)
for 3 MW cap $6.45 million
May 2015 10.3 16.5 $310,000 (0.26%)
for 3 MW cap $6.2 million
March 2016 8.9 16.5 $380,000 (0.32%)
for 3 MW cap $7.6 million
* The cost of buying remote solar energy outside of Palo Alto and transmitting it to Palo Alto.
When establishing the CLEAN price of 16.5 ¢/kWh in December 2012, Council reviewed the
market value of local solar energy and determined that, beyond the value of the energy itself,
there were additional financial and environmental benefits to increasing local solar generation.
In March 2016, when Council reaffirmed the 16.5 ¢/kWh price, staff estimated the cost of
buying remote solar energy outside of Palo Alto and transmitting it to Palo Alto was 8.9 ¢/kWh
(including renewable energy value, transmission and capacity) for a 20-year contract.
Therefore, purchasing the energy generated from 3 MW of local solar projects at 16.5 ¢/kWh
was expected to cost about $380,000 per year more than buying the same energy outside of
Palo Alto (and having it transported to Palo Alto). This extra cost is equivalent to a 0.32%
increase in the electric utility’s costs.
Discussion
Updated Value of Local Renewable Solar Energy
In April 2015, the City released an RFP for renewable energy projects that would deliver energy
to the City starting in 2021. In March 2016, the Council approved a Power Purchase Agreement
(PPA) with Hecate Energy resulting from this RFP, at a contract rate of 3.676 ¢/kWh for a 25-
year term (Staff Report 6637, Resolution 9578). However, this price was a bit of an outlier in the
RFP; the average proposed price of the 10 highest-ranking proposals was 5.4 ¢/kWh. Using this
more conservative value as the estimated value of renewable energy in California and adding
on the cost to deliver that energy to Palo Alto, combined with the capacity related benefits that
local solar would provide, yields a total value of local solar energy of 8.9 ¢/kWh for a 20-year
term, as illustrated in Figure 1. Over a 25-year term, the levelized delivery- and capacity-related
cost is slightly higher, yielding a total value of local solar energy of 9.1 ¢/kWh. These avoided
cost values are the same as determined last year (as shown in Table 1 above).
City of Palo Alto Page 6
Figure 1 – Avoided Cost Components of Local Solar Energy (20-Year Term)
Updated Value of Local Renewable Non-Solar Energy
For non-solar local eligible renewable energy resources, the estimated avoided cost
experienced a slight increase compared to last year’s estimate, even though the renewable
energy price it was based on was the same as last year (i.e., the results of the City’s 2015
renewable energy RFP). This was due to an updated analysis of the relative value of energy
produced with a “baseload” generation profile (i.e., operating at a fairly constant high capacity,
around-the-clock) versus energy produced with a typical solar generation profile. The energy
generated by 3 MW of local non-solar renewable energy projects would supply about 2.2% of
the City’s total electricity needs (assuming that the projects are “baseload” resources). For
these resources, the current estimated avoided costs are 8.4 ¢/kWh for a 20-year term, and 8.5
¢/kWh for a 25-year term—up from 8.1 ¢/kWh and 8.2 ¢/kWh, respectively, in March 2016.
Table 2 compares the current proposal to the price offered since May 2015 when non-solar
resources were first eligible for the Palo Alto CLEAN program. Since the price is set equal to the
avoided cost, the excess cost and rate impact are zero. Therefore, both the UAC and staff
propose removing the 3 MW program cap for local non-solar renewable energy projects.
City of Palo Alto Page 7
Table 2 – Palo Alto CLEAN Program Prices for Local Non-Solar Eligible Renewables
Council
Approval
Avoided Cost of Local Non-
Solar Renewable
Generation * (¢/kWh)
CLEAN Price
(¢/kWh)
Annual Excess
Cost
(Rate Impact)
Total Excess
Cost over 20-
year Term
May 2015 9.3 9.3 $0 (0%)
for 3 MW cap $0
March
2016 8.1 8.1 $0 (0%)
for 3 MW cap $0
Current
Proposal 8.4 8.4 $0 (0%)
for 3 MW cap $0
* The cost of buying remote baseload renewable energy and transmitting it to Palo Alto.
CLEAN Program Activity
At the end of 2015, the City received the first application for a project under the CLEAN
program (for a 113 kW project at the Unitarian Universalist Church of Palo Alto, which would be
owned by Komuna Energy, a commercial solar developer). In the first two months of 2016,
Komuna Energy executed CLEAN contracts for four additional projects on City-owned parking
garages, which bring the total reserved program capacity to 1.4 MW. These projects are now
actively engaged in the permitting process with the Planning Department.
Staff has also received word that one of the City’s large commercial customers is planning to
submit a CLEAN application for a solar project that would consume the remaining 1.6 MW of
program capacity—and potentially up to 1.4 MW in excess of the program cap. That customer
is awaiting Council’s decision on how the portion of its project that would exceed the CLEAN
program’s 3 MW capacity cap would be compensated before deciding what size project to
pursue under the program.
Proposed Structures and Alternatives
UAC Proposal – Avoided Cost after 3 MW Cap Reached
The UAC proposes that the 3 MW participation cap for local solar resources at the 16.5 ¢/kWh
contract rate be strictly enforced, with an unlimited amount of participation be allowed at the
avoided cost level after the 3 MW cap is reached. This approach honors the Council’s desire,
when it last updated the CLEAN program price for solar projects in March 2016, to limit the
excess costs and rate impact to the initial 3 MW level. However, staff does not expect any
projects to be developed at this time if they are compensated at the avoided cost level, but if
such projects become feasible in the future as solar costs fall it would be in the City’s interest to
enable them to be developed.
Staff Proposal – Tiered Stepdown Price Schedule
Staff proposes that the CLEAN price beyond the current 3 MW cap for solar projects be stepped
down in an orderly fashion to provide certainty for project developers until projects with a total
of 6 MW of capacity are installed. After the 6 MW cap, any additional projects would be
compensated at the avoided cost for local solar projects: currently 8.9 ¢/kWh for a 20-year
City of Palo Alto Page 8
term or 9.1 ¢/kWh for 25-year term. While this option does continue having an annual excess
cost after the initial 3 MW cap is reached, the excess cost decreases over time.
This approach, where the contract price steps down in a scheduled manner as certain capacity
levels are achieved, is used by a number of utilities with feed-in tariff programs, including the
Los Angeles Department of Water and Power (LADWP) and Marin Clean Energy (MCE). Below,
for example, is MCE’s price schedule for various types of eligible renewable energy resources in
their seven-tier program. (According to MCE’s website, they are currently about halfway
through the capacity limit of Tier 2.)
Table 3 – Marin Clean Energy Feed-in Tariff Tiered Price Schedule
Tier
Level
Capacity
Reserved (MW)
Solar Price
(¢/kWh)
Wind Price
(¢/kWh)
Baseload
Price (¢/kWh)
1 0-2 13.766 10.057 11.649
2 2-4 12.0 9.5 10.5
3 4-6 11.5 9.0 10.0
4 6-8 11.0 9.0 9.5
5 8-10 10.5 9.0 9.5
6 10-12 9.5 9.0 9.5
7 12-15 9.0 9.0 9.0
Staff proposes that the Palo Alto CLEAN program price would be stepped down as more
capacity is added as shown in Table 4. For the first 3 MW, the 16.5 ¢/kWh price is maintained
and the price steps down as capacity is reserved in 1 MW chunks until 6 MW is installed, when
the price goes to the avoided cost value. Project applications that straddle two or more of these
tier levels would receive a capacity-weighted average contract price based on the amount of
capacity they have in each of the tier levels they straddle.
Table 4 – Proposed Palo Alto CLEAN Tiered Price Schedule
Tier
Level
Capacity
Reserved
(MW)
Solar Price
(¢/kWh)
Annual Excess Cost [1]
(Rate Impact)
Total Excess Cost
over 20-year Term
1 0-3 16.5 $380,000 (0.32%) for 3 MW $7.6 million
2 3-4 14.0 $87,000 (0.07%) for 1 MW $1.75 million
3 4-5 12.0 $53,000 (0.04%) for 1 MW $1.05 million
4 5-6 10.0 $15,000 (0.01%) for 1 MW $0.3 million
5 Over 6 Avoided cost $0 $0
Total $535,000 (0.45%) $10.7 million
1 Assumes the avoided cost (the cost of buying remote solar energy outside of Palo Alto and
transmitting it to Palo Alto) is equal to 8.9 ¢/kWh for 20-year term.
City of Palo Alto Page 9
In addition to the UAC’s and staff’s recommended proposals, staff evaluated the following
three alternatives:
1. Strictly enforce the current 3 MW program cap on local solar resources that received
the 16.5 ¢/kWh price, ending the program once that cap is reached;
2. Compensate the entire “last project in” (the one that pushes the program over the 3
MW cap) at 16.5 ¢/kWh, then compensate everything after that at the avoided cost; and
3. Remove or raise the 3 MW program cap, while continuing to offer the 16.5 ¢/kWh price
to all local solar resources.
Option 1 – Strict 3 MW Program Cap
This approach, which reflects a literal interpretation of the current program rules, was rejected
for two reasons. First, it would be impractical to try to enforce a precise 3 MW cut-off line; as
the program approaches its capacity limit there will almost certainly be an application for a
project that would push slightly over the limit. Second, this approach could leave value on the
table for the City. If a project is capable of being developed at a contract rate equal to (or less
than) the City’s avoided cost for that energy, it would be in the City’s interest to accept that
project into the program, regardless of the amount of capacity already participating.
Option 2 – Avoided Cost after Last Project In
This option is similar to the recommended proposal, except it would allow the final project
accepted into the program to be compensated at the 16.5 ¢/kWh price, regardless of how far
beyond the 3 MW capacity limit this project pushes the program. The problem with this
approach is evident in the situation with the large commercial customer that recently
submitted a CLEAN program application that would cause the total program capacity to reach
4.4 MW. When Council reapproved the program in March 2016, Council set a 3 MW program
capacity limit that would result in an excess cost of $380,000 (a 0.32% rate impact). If the
program capacity reaches 4.4 MW (with all of that capacity being compensated at 16.5 ¢/kWh),
the cost would be $560,000 per year for 20 or 25 years (a 0.47% rate impact), and would
exceed those prior Council established parameters.
Option 3 – Remove 3 MW Program Cap
In this option, the 3 MW cap to receive the 16.5 ¢/kWh price would be increased, or even
eliminated. This approach would certainly promote greater participation in the CLEAN program,
and might go a long way towards helping the City meet the overall goals established in the
Local Solar Plan. However, if the cap was removed altogether, it would expose the City to
virtually unlimited excess costs.
Table 5 below presents the UAC’s and staff’s proposed program structures along with the
various alternatives described above.
City of Palo Alto Page 10
Table 5 – Potential Program Structures for Local Solar after 3 MW Capacity Limit
Alternatives
Capacity
at 16.5
¢/kWh
CLEAN Price after
reaching 3 MW cap
(¢/kWh)
Annual Excess
Cost
(Rate Impact)
Total Excess
Cost over 20-
year Term
UAC Recommendation –
avoided cost after 3 MW 3 8.9 $380,000
(0.32%) $7.6 million
Staff Recommendation –
gradual price step down 3
14 for 4th MW,
12 for 5th MW,
10 for 6th MW,
then avoided cost (8.9)
$535,000
(0.45%) $10.7 million
Option 1 – Strict 3 MW
limit, then close program 3 N/A $380,000
(0.32%) $7.6 million
Option 2 – 16.5 ¢/kWh
for Last Project In * ~4.4 16.5 $560,000
(0.47%) $10.9 million
Option 3 – No Cap Unlimited 16.5 Unlimited Unlimited
* Assumes that the capacity for the last project is 3 MW (1.4 MW over the 3 MW cap).
Recommendations
Staff recommends that the current CLEAN price of 16.5 ¢/kWh for solar projects continue until
the program reaches the 3 MW capacity limit, after which additional capacity would receive a
contract price that gradually steps down as described above until the City’s avoided cost for
such energy (currently 8.9 ¢/kWh for a 20-year contract term, or 9.1 ¢/kWh for a 25-year
contract term) is reached.
The UAC recommends that the current CLEAN price of 16.5 ¢/kWh for solar projects continue
until the program reaches the 3 MW capacity limit, after which additional capacity would
receive a contract price equal to the avoided cost for such energy (currently 8.9 ¢/kWh for a 20-
year contract term, or 9.1 ¢/kWh for a 25-year contract term).
In addition, the UAC and staff recommend continuing to offer non-solar eligible renewable
energy resources a CLEAN price equal to the avoided cost of the energy produced by those
resources, which is currently estimated at 8.4 ¢/kWh for a 20-year term, and 8.5 ¢/kWh for a
25-year term. Finally, the UAC and staff recommend removing the program cap of 3 MW for
local non-solar renewable resources.
Commission Review and Recommendation
The UAC considered staff’s recommendation at its November 2, 2016 meeting. Some
commissioners had concerns about the excess cost of the program, noting the other uses that
amount of ratepayer funds could be put to, and expressed a desire not to expand those excess
costs any further. Vice Chair Danaher expressed a desire to reduce the capacity being offered
the 16.5 ¢/kWh contract price from 3 MW to 2 MW, or to the amount of capacity that has
already applied to the program. However, Commissioner Forssell indicated she felt an
obligation to honor the 3 MW capacity limit at the 16.5 ¢/kWh price, given that one of the City’s
City of Palo Alto Page 11
large customers is planning to submit a CLEAN application based on that limit. Commissioner
Johnston asked if local solar provides resilience or reliability for the local electric distribution
system. Vice Chair Danaher noted that Commissioner Ballantine has indicated that the common
inverters used do not allow the system to remain energized and producing energy when there
is an outage on the distribution system.
After its discussion, the UAC voted 4-1 (with Chair Cook, Vice Chair Danaher, and
Commissioners Forssell and Trumbull voting yes, Commissioner Johnston voting no and
Commissioners Ballantine and Schwartz absent) to recommend that the City Council:
1. Continue the Palo Alto CLEAN program price for local solar energy resources at the
current price of 16.5 cents per kilowatt-hour (¢/kWh) for a 20-year or 25-year contract
term up to the current 3 MW program capacity limit, and for any capacity over 3 MW,
reduce the price to the avoided cost of such energy (currently 8.9 ¢/kWh for a 20-year
contract term, or 9.1 ¢/kWh for a 25-year contract term); and
2. Raise the Palo Alto CLEAN program price for local non-solar eligible renewable energy
resources to the updated avoided cost of such energy (8.4 ¢/kWh for a 20-year contract
term, or 8.5 ¢/kWh for a 25-year contract term), from the prior price (8.1 ¢/kWh for a
20-year contract term, or 8.2 ¢/kWh for a 25-year contract term), and to remove the
program limit of 3 MW for local non-solar eligible renewable resources.
Commissioner Johnston said he voted no as he supported the staff recommendation of
reducing the price in tiers until 6 MW of capacity was reached before moving to a price based
on the avoided cost. The draft notes from the UAC’s November 2, 2016 meeting are provided as
Attachment D.
Resource Impact
Staff estimates that the current cost of buying energy from solar resources outside of Palo Alto
is 8.9 ¢/kWh (including transmission and capacity) for a 20-year contract, or 9.1 ¢/kWh for a 25-
year contract. Purchasing the energy generated by local solar projects at this avoided cost level
is therefore not expected to impact the cost to the Utility. Purchasing energy at rates higher
than these avoided costs would impact the cost to the Utility, by the amounts listed above in
Table 5. Likewise, purchasing the energy generated from 3 MW of local, non-solar renewable
energy projects at the avoided cost level is not expected to impact the cost to the Utility.
Aside from the excess costs described above, staff time is associated with marketing the CLEAN
program and project review. The project review can be absorbed with existing staff over the life
of the program, and costs will be recovered through project review fees.
City of Palo Alto Page 12
Policy Implications
The recommendation to continue the Palo Alto CLEAN program supports the City’s carbon
neutral electric supply portfolio policy, the Local Solar Plan, and the LEAP Objective to enhance
supply reliability through the pursuit of local generation opportunities.
Environmental Review
Adoption of the attached resolution and the associated amendment of the CLEAN Program
Eligibility Rules and Requirements is not subject to California Environmental Quality Act (CEQA)
review because adoption of this resolution and associated amendment of CLEAN Program rules
is an administrative government activity that will not result in any direct or indirect physical
change to the environment as a result (CEQA Guidelines section 15378(b)(5)).
Attachments:
Attachment A: Resolution Continuing the Palo Alto CLEAN Program per UAC
Recommendation (with Exhibit A-1 Revised Program Rules) (PDF)
Attachment B: Resolution Continuing the Palo Alto CLEAN Program per Staff
Recommendation (with Exhibit B-1 Revised Program Rules) (PDF)
Attachment C: Updated Palo Alto CLEAN Power Purchase Agreement (PDF)
Attachment D: Excerpted Minutes of Nov 2, 2016 UAC Meeting (PDF)
NOT YET APPROVED
161116 jm/UTL/PA Clean Program
Resolution No. _________
Resolution of the Council of the City of Palo Alto Continuing the Palo Alto Clean Local
Energy Accessible Now Program at the Contract Rate of 16.5 ¢/kWh for Local Solar
Resources until Reaching 3 MW of Program Capacity and then Reducing the Contract
Rate to the City’s Avoided Cost Value; and Increasing the Contract Rate for Non-solar
Renewable Energy Resources to 8.4 ¢/kWh to 8.5 ¢/kWh Based on the Avoided Cost of
Local Renewable Energy and Amending Associated Program Rules
R E C I T A L S
A. On March 5, 2012, the City approved the Palo Alto Clean Local Energy Accessible
Now (CLEAN) Program (or feed-in tariff). Under the Palo Alto CLEAN Program, participants who
build a new solar generating system in Palo Alto may obtain a long-term, fixed-price contract
with the City to sell the energy from the system to the City’s electric utility.
B. Council extended the program beyond its original termination date of December
31, 2012 and has periodically reviewed the contract price and program cap.
C. On March 28, 2016, Council approved Resolution 9580 (as amended for
clarification by Resolution 9618 (8/22/16)), which continued Palo Alto CLEAN at the contract
price of 16.5 cents per kilowatt-hour (¢/kWh) for local solar resources, and reduced the
contract prices for local non-solar renewable energy resources to 8.1 ¢/kWh for a 20-year term
or 8.2 ¢/kWh for a 25-year term. The contract rates for non-solar resources were set to be
equal to the then current estimated avoided cost of the energy generated by these resources.
The resolution further continued the separate program caps of 3 megawatts (MW) of
generating capacity for both the solar and non-solar resources.
D. In the past year, the City has received five CLEAN Program project applications
for local solar facilities, which together will total 1.43 MW of capacity, or 47.6% of the 3 MW
program cap.
E. The City wants to continue to encourage the development of distributed
renewable energy resources within its territory; however, it also wishes to minimize the impact
of these projects on ratepayers.
F. The City wants to continue the CLEAN program for solar resources at the current
contract price of 16.5 ¢/kWh until the program reaches the 3 MW cap, and extend the program
after reaching the 3 MW cap, but reduce the contract price to the City’s avoided cost of such
energy (currently 8.9 ¢/kWh for a 20-year contract term, or 9.1 ¢/kWh for a 25-year contract
term) for all additional capacity. Therefore, the 3 MW program cap is eliminated since the
contract price after 3 MW of capacity is reached is equal to the City’s avoided cost of energy
such that there is no rate impact.
G. Additionally, the City wants to raise the contract prices available to local non-
solar eligible renewable resources to 8.4 ¢/kWh for a 20-year term or 8.5 ¢/kWh for a 25-year
ATTACHMENT A
NOT YET APPROVED
161116 jm/UTL/PA Clean Program
term for such resources, which is equal to the current estimated avoided cost of energy
generated by these resources. For local non-solar resources, the 3 MW cap is eliminated since
there is no rate impact when the contract price is equal to the avoided cost of energy for these
resources.
The Council of the City of Palo Alto (“City”) RESOLVES:
SECTION 1. The Council adopts revised Palo Alto CLEAN Program Eligibility Rules
Requirements, set forth in Exhibit A attached to this Resolution.
SECTION 2. The Council authorizes the City Manager or his designee to sign contracts
for the output of one or more solar, or other non-solar eligible renewable energy resource
meeting the CLEAN Program Eligibility Rules and Requirements described in Section 1.
SECTION 3. The Council finds that the adoption of this resolution and the associated
amendment of CLEAN Program Eligibility Rules and Requirements is not subject to California
Environmental Quality Act (CEQA) review because adoption of this resolution and associated
amendment of CLEAN Program rules is an administrative government activity that will not
result in any direct or indirect physical change to the environment as a result (CEQA Guidelines
section 15378(b)(5)).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ _________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ __________________________
Senior Deputy City Attorney City Manager
__________________________
Director of Utilities
___________________________
Director of Administrative Services
PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW)
PROGRAM ELIGIBILITY RULES AND REQUIREMENTS
Effective __________
A. PARTICIPATION ELIGIBILITY:
The Palo Alto Clean Local Energy Accessible Now Program (the “CLEAN Program”) is open to
participation by any Eligible Renewable Energy Resource, as defined in Section D.4, that
satisfies these Program Eligibility Rules and Requirements.
B. TERRITORIALITY REQUIREMENT:
In order to be eligible to participate in the CLEAN Program, an Eligible Renewable Energy
Resource must be located in and generating electricity from within the utility service area of
the City of Palo Alto.
C. PRICES AND TERM FOR ELIGIBLE RENEWABLE RESOURCES:
The following purchase prices shall apply to the electricity produced by an Eligible
Renewable Energy Resource participating in the Program, except as provided in Section D.5.
Solar Energy Resources:
Total Solar Capacity Reserved Contract Term Contract Price
0-3 MW 20 or 25 years $0.165 / kWh
More than 3 MW 20 years $0.089 / kWh
More than 3 MW 25 years $0.091 / kWh
Solar Energy Resources that straddle multiple pricing tiers shall receive a weighted-average
purchase price based on the amount of their capacity that is contained in each tier.
Non-Solar Eligible Renewable Energy Resources:
Contract Term Contract Price
20 years $0.084 / kWh
25 years $0.085 / kWh
D. ADDITIONAL RULES AND REQUIREMENTS:
1. The owner of the Eligible Renewable Energy Resource shall enter into an Eligible
Renewable Energy Resource Power Purchase Agreement (“PPA”) with the City of Palo
Alto prior to delivering energy to the City.
2. An application for participation in the CLEAN Program to sell output to the City (the
“Application”) may be submitted at any time. Applications will be considered in the
order received.
3. Eligible Renewable Energy Resource means an electric generating facility that: (a) is
PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW)
PROGRAM ELIGIBILITY RULES AND REQUIREMENTS
Effective __________
defined and qualifies as an “eligible renewable energy resource” under California Public
Utilities Code Section 399.12(e) and California Public Resources Code Section 25471,
respectively, as amended; and (b) meets the territoriality requirement set forth in
Section B.
4. The California Energy Commission’s (“CEC”) certification of the Eligible Renewable
Energy Resource shall be required within six (6) months of the commercial operation
date of the generating facility; the facility’s owner shall provide written notice of the
CEC’s certification to the City within ten (10) business days of receipt of said
certification. If the City agrees, in its sole discretion, to take delivery of the generating
facility’s electricity prior to the CEC’s certification, then, as the facility’s electricity
cannot be considered in fulfillment of the City’s RPS requirements, the price that the
City will pay for the generating facility’s electricity (the “Pre-Certification Price”) will be
set to $0.076 per kWh (for a 20-year contract term) or $0.08 per kWh (for a 25-year
contract term), based on the estimated levelized cost of brown power over a 20-year or
25-year period, respectively. Upon the CEC’s certification of the generating facility and
the provision of notice of such certification to the City in accordance with this section,
the City will pay the Price set forth in Section C of these CLEAN Program Rules and
Requirements and the PPA (collectively referred to as the “Contract Price”) for the
generating facility’s electricity delivered on and after the date of the CEC’s certification.
The City will, in its sole discretion, “true-up”, as appropriate, the difference between the
Contract Price and the Pre-Certification Price for any electricity received and paid for by
the City, effective as of the date of certification of the Eligible Renewable Energy
Resource.
5. If an Eligible Renewable Energy Resource is authorized to participate in the CLEAN
Program, then that Resource shall not be entitled to receive any rebate or other
incentive from the City’s Photovoltaic (PV) Partners Program or any other similar
incentive program funded by the City’s ratepayers. To the extent any rebate or
incentive is paid to the owner of the Resource, that rebate or incentive shall be
disgorged and refunded to the City upon 30 days’ notice, if the Eligible Renewable
Energy Resource continues to participate in the CLEAN Program. If a rebate or an
incentive has been paid to the Eligible Renewable Energy Resource, then that Resource
shall be ineligible to participate in the CLEAN Program.
6. All electricity generated by the Eligible Renewable Energy Resource shall be delivered
only to the City. No portion of the electricity may be used to offset any load of the
generating facility (other than incidental loads associated with operating the generating
facility).
7. A metering and administration fee will be charged to each Eligible Renewable Energy
Resource that participates in the CLEAN Program. See Utilities Rate Schedule E-15
(Electric Service Connection Fees).
NOT YET APPROVED
161116 jm UTL/PA Clean Program
Resolution No. _________
Resolution of the Council of the City of Palo Alto Continuing the Palo Alto Clean Local Energy
Accessible Now Program at the Contract Rate of 16.5 ¢/kWh for Local Solar Resources with
a Tiered Pricing Structure that Declines to the City’s Avoided Cost Value upon Reaching 6
MW of Program Capacity; and Increasing the Contract Rate for Non-solar Renewable Energy
Resources to 8.4 ¢/kWh to 8.5 ¢/kWh Based on the Avoided Cost of Local Renewable Energy
and Amending Associated Program Rules
R E C I T A L S
A. On March 5, 2012, the City approved the Palo Alto Clean Local Energy Accessible
Now (CLEAN) Program (or feed-in tariff). Under the Palo Alto CLEAN Program, participants who
build a new solar generating system in Palo Alto may obtain a long-term, fixed-price contract with
the City to sell the energy from the system to the City’s electric utility.
B. Council extended the program beyond its original termination date of December 31,
2012 and has periodically reviewed the contract price and program cap.
C. On March 28, 2016, Council approved Resolution 9580 (as amended for clarification
by Resolution 9618 (8/22/16)), which continued Palo Alto CLEAN at the contract price of 16.5 cents
per kilowatt-hour (¢/kWh) for local solar resources, and reduced the contract prices for local non-
solar renewable energy resources to 8.1 ¢/kWh for a 20-year term or 8.2 ¢/kWh for a 25-year term.
The contract rates for non-solar resources were set to be equal to the then current estimated
avoided cost of the energy generated by these resources. The resolution further continued the
separate program caps of 3 megawatts (MW) of generating capacity for both the solar and non-
solar resources.
D. In the past year, the City has received five CLEAN Program project applications for
local solar facilities, which together will total 1.43 MW of capacity, or 47.6% of the 3 MW program
cap.
E. The City wants to encourage the development of distributed renewable energy
resources within its territory while providing project developers certainty regarding the revenues
these projects can expect to earn and minimizing the impact of these projects on ratepayers.
F. The City wants to continue the CLEAN program for solar resources at the current
contract price of 16.5 ¢/kWh until the program reaches the 3 MW cap, and extend the program
after reaching the 3 MW cap, but reduce the contract price gradually in steps according to the
following schedule: the fourth MW of capacity would receive a contract price of 14 ¢/kWh, the fifth
MW of capacity would receive a contract price of 12 ¢/kWh, the sixth MW of capacity would receive
a contract price of 10 ¢/kWh, and all additional capacity would receive a contract price equal to the
City’s avoided cost of such energy (currently 8.9 ¢/kWh for a 20-year contract term, or 9.1 ¢/kWh
for a 25-year contract term). Therefore, the 3 MW program cap is eliminated since the contract
price after 6 MW of capacity is reached is equal to the City’s avoided cost of energy such that there
is no rate impact.
ATTACHMENT B
NOT YET APPROVED
161116 jm UTL/PA Clean Program
G. Additionally, the City wants to raise the contract prices available to local non-solar
eligible renewable resources to 8.4 ¢/kWh for a 20-year term or 8.5 ¢/kWh for a 25-year term for
such resources, which is equal to the current estimated avoided cost of energy generated by these
resources. For local non-solar resources, the 3 MW cap is eliminated since there is no rate impact
when the contract price is equal to the avoided cost of energy for these resources.
The Council of the City of Palo Alto (“City”) RESOLVES:
SECTION 1. The Council adopts revised Palo Alto CLEAN Program Eligibility Rules
Requirements, set forth in Exhibit B attached to this Resolution.
SECTION 2. The Council authorizes the City Manager or his designee to sign contracts for
the output of one or more solar, or other non-solar eligible renewable energy resource meeting the
CLEAN Program Eligibility Rules and Requirements described in Section 1.
SECTION 3. The Council finds that the adoption of this resolution and the associated
amendment of CLEAN Program Eligibility Rules and Requirements is not subject to California
Environmental Quality Act (CEQA) review because adoption of this resolution and associated
amendment of CLEAN Program rules is an administrative government activity that will not result in
any direct or indirect physical change to the environment as a result (CEQA Guidelines section
15378(b)(5)).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ _______________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ _______________________
Senior Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW)
PROGRAM ELIGIBILITY RULES AND REQUIREMENTS
Effective __________
A. PARTICIPATION ELIGIBILITY:
The Palo Alto Clean Local Energy Accessible Now Program (the “CLEAN Program”) is open to
participation by any Eligible Renewable Energy Resource, as defined in Section D.4, that
satisfies these Program Eligibility Rules and Requirements.
B. TERRITORIALITY REQUIREMENT:
In order to be eligible to participate in the CLEAN Program, an Eligible Renewable Energy
Resource must be located in and generating electricity from within the utility service area of
the City of Palo Alto.
C. PRICES AND TERM FOR ELIGIBLE RENEWABLE RESOURCES:
The following purchase prices shall apply to the electricity produced by an Eligible
Renewable Energy Resource participating in the Program, except as provided in Section D.5.
Solar Energy Resources:
Total Solar Capacity Reserved Contract Term Contract Price
0-3 MW 20 or 25 years $0.165 / kWh
3-4 MW 20 or 25 years $0.140 / kWh
4-5 MW 20 or 25 years $0.120 / kWh
5-6 MW 20 or 25 years $0.100 / kWh
More than 6 MW 20 years $0.089 / kWh
More than 6 MW 25 years $0.091 / kWh
Solar Energy Resources that straddle multiple pricing tiers shall receive a weighted-average
purchase price based on the amount of their capacity that is contained in each tier.
Non-Solar Eligible Renewable Energy Resources:
Contract Term Contract Price
20 years $0.084 / kWh
25 years $0.085 / kWh
D. ADDITIONAL RULES AND REQUIREMENTS:
1. The owner of the Eligible Renewable Energy Resource shall enter into an Eligible
Renewable Energy Resource Power Purchase Agreement (“PPA”) with the City of Palo
Alto prior to delivering energy to the City.
PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW)
PROGRAM ELIGIBILITY RULES AND REQUIREMENTS
Effective __________
2. An application for participation in the CLEAN Program to sell output to the City (the
“Application”) may be submitted at any time. Applications will be considered in the
order received.
3. Eligible Renewable Energy Resource means an electric generating facility that: (a) is
defined and qualifies as an “eligible renewable energy resource” under California Public
Utilities Code Section 399.12(e) and California Public Resources Code Section 25471,
respectively, as amended; and (b) meets the territoriality requirement set forth in
Section B.
4. The California Energy Commission’s (“CEC”) certification of the Eligible Renewable
Energy Resource shall be required within six (6) months of the commercial operation
date of the generating facility; the facility’s owner shall provide written notice of the
CEC’s certification to the City within ten (10) business days of receipt of said
certification. If the City agrees, in its sole discretion, to take delivery of the generating
facility’s electricity prior to the CEC’s certification, then, as the facility’s electricity
cannot be considered in fulfillment of the City’s RPS requirements, the price that the
City will pay for the generating facility’s electricity (the “Pre-Certification Price”) will be
set to $0.076 per kWh (for a 20-year contract term) or $0.08 per kWh (for a 25-year
contract term), based on the estimated levelized cost of brown power over a 20-year or
25-year period, respectively. Upon the CEC’s certification of the generating facility and
the provision of notice of such certification to the City in accordance with this section,
the City will pay the Price set forth in Section C of these CLEAN Program Rules and
Requirements and the PPA (collectively referred to as the “Contract Price”) for the
generating facility’s electricity delivered on and after the date of the CEC’s certification.
The City will, in its sole discretion, “true-up”, as appropriate, the difference between the
Contract Price and the Pre-Certification Price for any electricity received and paid for by
the City, effective as of the date of certification of the Eligible Renewable Energy
Resource.
5. If an Eligible Renewable Energy Resource is authorized to participate in the CLEAN
Program, then that Resource shall not be entitled to receive any rebate or other
incentive from the City’s Photovoltaic (PV) Partners Program or any other similar
incentive program funded by the City’s ratepayers. To the extent any rebate or
incentive is paid to the owner of the Resource, that rebate or incentive shall be
disgorged and refunded to the City upon 30 days’ notice, if the Eligible Renewable
Energy Resource continues to participate in the CLEAN Program. If a rebate or an
incentive has been paid to the Eligible Renewable Energy Resource, then that Resource
shall be ineligible to participate in the CLEAN Program.
6. All electricity generated by the Eligible Renewable Energy Resource shall be delivered
only to the City. No portion of the electricity may be used to offset any load of the
generating facility (other than incidental loads associated with operating the generating
facility).
PALO ALTO CLEAN (CLEAN LOCAL ENERGY ACCESSIBLE NOW)
PROGRAM ELIGIBILITY RULES AND REQUIREMENTS
Effective __________
7. A metering and administration fee will be charged to each Eligible Renewable Energy
Resource that participates in the CLEAN Program. See Utilities Rate Schedule E-15
(Electric Service Connection Fees).
040914 jrm 0180042 1
POWER PURCHASE AGREEMENT
ELIGIBLE RENEWABLE ENERGY RESOURCE
(Palo Alto Clean Local Energy Accessible Now Program)
This Power Purchase Agreement - Eligible Renewable Energy Resource, dated, for convenience,
, 20 (the “Effective Date”), is entered into by and between the CITY OF PALO
ALTO, a California chartered municipal corporation, and ,
a corporation (individually, a “Party” and, collectively, the “Parties”).
RECITALS
1.The Buyer has adopted and implemented its CLEAN Program, which allows an owner of a
qualifying electric generation system to sell to the Buyer the power output of a small-scale distributed
generation Eligible Renewable Energy Resource, subject to the CLEAN Program’s rules and requirements.
2.The Seller owns or operates and desires to interconnect its Facility in parallel with Buyer’s
Distribution System and sell the Energy produced by its Facility, net of Station Service Load, directly to the
Buyer in furtherance of the CLEAN Program.
3.The Parties do not intend this Agreement to constitute an agreement by the Buyer to provide
retail electrical service to the Seller.
4.The Parties wish to enter into a power purchase agreement for the sale and purchase of the
Output of the Facility. The Parties will enter into a separate “Interconnection Agreement” in connection
with this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the following covenants,
terms and conditions, the Parties agree, as follows:
AGREEMENT
1.1 DEFINITIONS
The initially capitalized terms, whenever used in this Agreement, have the meanings set forth
below, unless they are otherwise herein defined. The terms “include,” “includes,” and “including,” when
used in this Agreement, shall mean, respectively, “include, without limitation,“ “includes, without
limitation” and “including, without limitation.”
“Agreement” means this Power Purchase Agreement – Eligible Renewable Energy Resource between the
Buyer and the Seller.
“Business Day” means any day except a Saturday, Sunday, or a day that the City observes as a regular
holiday under Palo Alto Municipal Code section 2.08.100(a).
“Buyer” refers to the City of Palo Alto, California, with a principal place of business at 250 Hamilton
Avenue, Palo Alto, California 94301.
“Buyer’s Distribution System” means the wires, transformers, and related equipment used by the Buyer to
deliver electric power to the Buyer’s retail customers, typically at sub-transmission level voltages or lower.
“CAISO” means the California Independent System Operator Corporation, or successor entity.
“CAISO Tariff” means the CAISO FERC Electric Tariff, as amended.
“Capacity” means the ability of a generator at any given time to produce Energy at a specified rate, as
ATTACHMENT C
040914 jrm 0180042 2
measured in megawatts (“MW”) or kilowatts (“kW”), and any reporting rights associated with it.
“Capacity Attributes” means any current or future defined characteristic, certificate, tag, credit, or
ancillary service attribute, whether general in nature or specific as to the location or any other attribute of
the Facility, intended to value any aspect of the Contract Capacity of the Facility to produce Energy or
ancillary services, including contributions towards Resource Adequacy (including those requirements
defined in Section 40 of the CAISO Tariff) or reserve requirements (if any), and any other reliability or
power attributes.
“CEC” means the California Energy Resources Conservation and Development Commission, or successor
agency.
“Certificate of RPS Eligibility” means a certificate issued by the CEC as evidence of RPS Certification of
the Facility.
“City” means the government of the City of Palo Alto, California.
“CLEAN Program” refers to the Palo Alto Clean Local Energy Accessible Now Program, a renewable
energy program established by the City by adoption of resolution number , dated , of the
Palo Alto City Council, whereby the Buyer will purchase from the Seller the Output of Eligible Renewable
Energy Resources that meet specified criteria set forth in the City’s applicable ordinances and resolutions.
“Commercial Operation” means the period of operation of the Facility, once the Commercial Operation
Date has occurred.
“Commercial Operation Date” means the date specified in the Commercial Operation Date Confirmation
Letter, which the Parties execute and exchange in accordance with this Agreement.
“Contract Capacity” means the installed electrical Capacity available upon the Commercial Operation
Date of the Facility in an amount, as specified in Exhibit “PPA-A.” “Contract Capacity” is measured at the
Buyer’s revenue meter at the Delivery Point and is net of any Station Service Loads, any applicable Facility
step-up transformer losses, and distribution losses on Buyer’s Distribution System up to the Delivery Point.
“Contract Price” means the price paid by the Buyer to the Seller for the Output generated at the Facility
and received by the Buyer, as set forth in Exhibit “PPA-A.”
“CPUC” means the California Public Utilities Commission, or successor agency.
“Delivery Point” means the point of interconnection to Buyer’s Distribution System, where the Buyer
accepts title to the Output.
“Delivery Term” has the meaning set forth in Section 14.2 hereof.
“Eligible Renewable Energy Resource” means an electric generating facility that is defined and qualified
as an “eligible renewable energy resource” under California Public Utilities Code Section 399.12(e) and
California Public Resources Code Section 25471, respectively, as amended.
“Energy” means electrical energy generated from the Facility and delivered to Buyer’s Distribution System
with the voltage and quality required by the Buyer, and measured in megawatt-hours (“MWh”) or kilowatt-
hours (“kWh”), as metered at the Delivery Point.
“Facility” means the qualifying renewable energy generation equipment and associated power conditioning
and interconnection equipment that deliver the Output to the Buyer at the Delivery Point.
“FERC” means the Federal Energy Regulatory Commission, or successor agency.
040914 jrm 0180042 3
“Forced Outage” means an unplanned outage of one or more of the Facility’s components that results in a
reduction of the ability of the Facility to produce Capacity.
“Force Majeure” means an event or circumstance, which prevents a Party from performing its obligations
under this Agreement, and which is not in the reasonable control of, or the result of negligence of, the Party
claiming Force Majeure, and which by the exercise of due diligence is unable to overcome or cause to be
avoided. “Force Majeure” shall include: (a) An act of nature, riot, insurrection, war, explosion, labor
dispute, fire, flood, earthquake, storm, lightning, tidal wave, backwater caused by flood, act of the public
enemy, terrorism, or epidemic; (b) Interruption of transmission or generation services as a result of a
physical emergency condition (and not congestion-related or economic curtailment) not caused by the fault
or negligence of the Party claiming Force Majeure and reasonably relied upon and without a reasonable
source of substitution to make or receive deliveries hereunder, civil disturbances, strike, labor disturbances,
labor or material shortage, national emergency, restraint by court order or other public authority or
governmental agency, actions taken to limit the extent of disturbances on the electrical grid; or (c) Other
similar causes beyond the control of the Party affected, which causes such Party could not have avoided by
the exercise of due diligence and reasonable care. A Party's financial incapacity, the Seller’s ability to sell
the Output at a more favorable price or under more favorable conditions, or the Buyer’s ability to acquire
the Output at a more favorable price or under more favorable conditions or other economic reasons shall
not constitute an event of Force Majeure. “Force Majeure” does not include a Forced Outage to the extent
such event is not caused or exacerbated by an event of Force Majeure, as described above, and does not
include the Seller’s inability to obtain financing, permits, or other equipment and instruments necessary to
plan for, construct, or operate the Facility.
“Good Utility Practice” means those practices, methods and acts that would be implemented and followed
by prudent operators of electric energy generating facilities in the western United States, similar to the
Facility, during the relevant time period, which practices, methods and acts, in the exercise of prudent and
responsible professional judgment in the light of the facts known at the time the decision was made, could
reasonably have been expected to accomplish the desired result consistent with good business practices,
reliability, and safety. The Seller acknowledges that its use of Good Utility Practice does not exempt it
from performing any of its obligations arising under this Agreement. “Good Utility Practice” includes, at a
minimum, those professionally responsible practices, methods and acts described in the preceding
paragraph that comply with manufacturers’ warranties, restrictions in this Agreement, the interconnection
requirements of Buyer, the requirements of governmental authorities, and WECC and NERC standards.
“Good Utility Practice” also includes the taking of reasonable steps to ensure that:
(a) Equipment, materials, resources, and supplies, including spare parts inventories, are available
to meet the Facility’s needs;
(b) Sufficient operating personnel are available at all times and are adequately experienced and
trained and licensed as necessary to operate the Facility properly and efficiently, and are capable
of responding to reasonably foreseeable emergency conditions at the Facility and emergencies
whether caused by events on or off the Facility’s site;
(c) Preventive, routine, and non-routine maintenance and repairs are performed on a basis that
ensures reliable, long-term and safe operation of the Facility, and are performed by
knowledgeable, trained, and experienced personnel utilizing proper equipment and tools;
(d) Appropriate monitoring and testing are performed to ensure equipment is functioning as
designed; and
(e) Equipment is not operated in a reckless manner, in violation of manufacturer’s guidelines or in
a manner unsafe to workers, the general public, or the connecting utility’s electric system or
contrary to environmental laws, permits or regulations or without regard to defined limitations
such as, flood conditions, safety inspection requirements, operating voltage, current, volt ampere
reactive (VAR) loading, frequency, rotational speed, polarity, synchronization, and control system
limits; and equipment and components are designed and manufactured to meet or exceed the
standard of durability that is generally used for electric energy generating facilities operating in the
western United States and will function properly over the full range of ambient temperature and
weather conditions reasonably expected to occur at the Facility site and under both normal and
emergency conditions.
040914 jrm 0180042 4
“Green Attributes” refers to the definition set forth in the Standard Terms and Conditions, Appendix A-2,
as amended, Decision D.07-02-011, as modified by D.07-05-057, of the CPUC, which incorporates the
definition of “Environmental Attributes” set forth in the Standard Terms and Conditions, Appendix A-1, as
amended, D. 04-06-014. “Green Attributes” includes any and all credits, benefits, emissions reductions,
environmental air quality credits, offsets, and allowances, howsoever entitled, attributable to the generation
from the Facility, and its displacement of conventional energy generation, whether existing now or arising
in the future. “Green Attributes” includes RECs, as well as (1) any avoided emissions of pollutants to the
air, soil or water, such as sulfur oxides (“SOx”), nitrogen oxides (“NOx”), carbon monoxide (“CO”) and
other pollutants; (2) any avoided emissions of carbon dioxide (“CO2”), methane (“CH4”), nitrous oxide,
hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other greenhouse gases (“GHGs”) that have
been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law,
to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the
atmosphere; and (3) the reporting rights to these avoided emissions such as Green Tag Reporting Rights
and RECs. “Green Tag Reporting Rights” are the right of a Green Tag Purchaser to report the ownership
of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state
agency or any other party at the Green Tag Purchaser’s discretion, and include those Green Tag Reporting
Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any present or future federal,
state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags
are accumulated on a kWh basis and one Green Tag represents the Green Attributes associated with one (1)
MWh of Energy. “Green Attributes” do not include (i) any Energy, Capacity, reliability, or other power
attributes of the Facility, (ii) production or investment tax credits associated with the construction or
operation of the Facility and other financial incentives in the form of credits, grants, reductions, or
allowances associated with the Facility that are applicable to a state or federal income taxation obligation,
(iii) fuel-related subsidies or “tipping fees” that may be paid to Seller to accept certain fuels, or local
subsidies received by the generator for the destruction of particular pre-existing pollutants or the promotion
of local environmental benefits, or (iv) emission reduction credits encumbered, used or created by the
Facility for compliance with or sale under local, state, or federal operating and/or air quality permits or
programs. If the Facility is a biomass or landfill facility and the Seller receives any tradable Green
Attributes based on the Facility’s greenhouse gas reduction benefits or other emission offsets attributed to
its fuel usage, the Seller shall provide the Buyer with sufficient Green Attributes to ensure that there are
zero net emissions associated with the production of electricity from the Facility. “Green Attributes”
includes any other environmental credits or benefits recognized in the future and attributable to Energy
generated by the Facility during the Term that may not be represented by Green Tag Reporting Rights or
RECs, unless otherwise excluded herein. Any Green Attributes provided under this Agreement shall be
documented by RECs, or any other representation of the environmental benefits of the Output, the monthly
cumulative total of which shall be provided to the Buyer, as specified herein.
“Interconnection Agreement” refers to the agreement between the Buyer and the Seller, specific to the
interconnection of the Facility to Buyer’s Distribution System.
“NERC” means the North American Electric Reliability Corporation, or successor organization.
“NCPA” means Northern California Power Agency, a California joint action agency, or successor agency.
“Output” means all Capacity associated with Contract Capacity and associated Energy made available
from the Facility, as well as any Capacity Attributes, Green Attributes, or other attributes existing now or in
the future associated with Contract Capacity and/or associated Energy. “Output” does not include
production or investment tax credits associated with the construction or operation of the Facility and other
financial incentives in the form of credits, grants, reductions, or allowances associated with the Facility that
are applicable to a state or federal income taxation obligation.
“Planned Outage” means an outage, scheduled in advance, of one or more of the Facility’s components
that results in a reduction of the ability of the Facility to produce Capacity.
040914 jrm 0180042 5
“Pre-Certification Price” means the contract price to be paid for all Energy delivered to the Buyer prior to
the RPS Certification Date, as specified in Exhibit “PPA-A”.
“Renewable Energy Credit” or “REC” has the meaning set forth in Section 399.12(h)(1) and (2) of the
California Public Utilities Code, and includes a certificate of proof that one unit of electricity was generated
by an Eligible Renewable Energy Resource. Currently, RECs are used to convey all Green Attributes
associated with electricity production by a renewable energy resource. RECs are accumulated on a kWh
basis and one REC represents the Green Attributes associated with the generation of 1 MWh (1,000 kWhs)
from the Facility. For purposes of this Agreement, the term REC shall be synonymous with the term Green
Tag, green ticket, bundled or unbundled renewable energy credit, tradable renewable energy certificates, or
any other term used to describe the documentation that evidences the renewable and Green Attributes
associated with electricity production by an Eligible Renewable Energy Resource.
“Renewables Portfolio Standard” or “RPS” means the standard adopted by the State of California
pursuant to Senate Bill 2 1st Extraordinary Session (SBX1 2, Chapter 1, Statutes 2011-12), and California
Public Utilities Code Sections 399.11through 399.31, inclusive, as may be amended, setting minimum
renewable energy targets for local publicly owned electric utilities.
“Reservation Deposit” means the monetary deposit submitted by the Seller (or the Facility sponsor on
behalf of the Seller) to secure a reservation of the CLEAN Program’s prices. The Reservation Deposit is
set forth in Exhibit “PPA-A.”
“Resource Adequacy” means a requirement by a governmental authority or in accordance with its FERC-
approved tariff, or a policy approved by a local regulatory authority, that is binding upon either Party and
that requires that Party to procure a certain amount of electric generating capacity.
“RPS Certification” means certification by the CEC that the Facility qualifies as an Eligible Renewable
Energy Resource for RPS purposes, and that all Energy produced by the Facility qualifies as generation
from an Eligible Renewable Energy Resource, as evidenced by a Certificate of RPS Eligibility.
“RPS Certification Date” means the date on which the RPS Certification begins, as specified in the
Certificate of RPS Eligibility.
“Seller” means with a principal place of business at
, , .
“Station Service Load” means the electrical loads associated with the operation and maintenance of the
Facility, which may at times be supplied from the Facility’s Energy.
“Term” has the meaning set forth in Section 14.1 hereof.
“WECC” means the Western Electricity Coordinating Council, the regional entity responsible for
coordinating and promoting regional bulk electric system reliability in the Western Canada and the United
States, or any successor organization.
2.0 SELLER’S GENERATING FACILITY, PURCHASE PRICE AND PAYMENT
2.1 Facility. This Agreement governs the Buyer’s purchase of the Output from the Facility,
as described in Exhibit “PPA-A.” The Seller shall not modify the Facility to increase or decrease the
Contract Capacity after the Commercial Operation Date.
2.2 Products Purchased. During the Delivery Term, the Seller shall sell and deliver, or cause
to be delivered, and the Buyer shall purchase and receive, or cause to be received, the Output from the
Facility. The Seller shall not have the right to procure the Output from sources other than the Facility for
sale or delivery to the Buyer under this Agreement or to substitute the Output.
040914 jrm 0180042 6
2.3 Delivery Term. The Delivery Term shall commence on the Commercial Operation Date under this
Agreement, and shall continue for an uninterrupted period of twenty (20) years. This period will commence
on the first day of the calendar month immediately following the Commercial Operation Date. As evidence
of the Commercial Operation Date, the Parties shall execute and exchange the “Commercial Operation
Date Confirmation Letter,” attached hereto as Exhibit “PPA-B.” The Commercial Operation Date shall be
the date on which the Parties acknowledge, in writing, that the Facility starts operating and is otherwise in
compliance with applicable interconnection and system protection requirements, including the final
approvals by the City’s building department official.
2.4 Payment for Products Purchased.
2.4.1 Deliveries Prior to RPS Certification Date. Once the Facility has achieved
Commercial Operation, if the CEC has not issued a Certificate of RPS Eligibility for the Facility
or the Facility has not been registered with the appropriate entity for the tracking of Green
Attributes, the Buyer will pay the Seller for the Output by multiplying the Pre-Certification Price
by the quantity of Energy.
2.4.2 Deliveries After RPS Certification Date. Once the Facility has achieved
Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the Facility, and
the Facility has been registered with the appropriate entity for the tracking of Green Attributes, the
Buyer shall pay the Seller for all Output on or after the RPS Certification Date by multiplying the
Contract Price by the quantity of Energy.
2.4.3 True-up Upon Issuance of Certificate of RPS Eligibility. Once the Facility has
achieved Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the
Facility, and the Facility has been registered with the appropriate entity for the tracking of Green
Attributes, the Buyer will pay the Seller an amount equal to the difference between the Contract
Price and the Pre-Certification Price for the Output (a) that was delivered on or after the RPS
Certification Date and (b) for which the Seller has already received payment at the Pre-
Certification Energy Price.
2.4.4 Energy in Excess of Contract Capacity. The Seller shall not receive payment for
any Energy or Green Attributes delivered in any hour to the Buyer in excess of the following
amount of energy (in kilowatt-hours): 110% of the Contract Capacity (in kilowatts) multiplied by
one hour. Any payment in excess of this amount shall be refunded to the Buyer, on demand.
2.5 Billing. The Buyer shall pay the Seller by check or electronic funds transfer, on a
monthly basis, within thirty (30) days of the meter reading date.
2.6 Title and Risk of Loss. Title to and risk of loss related to the Output shall be transferred
from the Seller to the Buyer at the Delivery Point. The Seller warrants that it will deliver to the Buyer the
Output free and clear of all liens, security interests, claims, encumbrances or any interest therein or thereto
by any person, arising prior to the Delivery Point.
2.7 No Additional Incentives. The Seller warrants that it has not received any other
incentives funded by the Buyer’s ratepayers and it further agrees that, during the Term, it shall not seek
additional compensation or other benefits from the Buyer pursuant to the following programs of the Buyer:
(a) Photovoltaic (PV) Partners Program; (b) Power from Local Ultra-Clean Generation Incentive (PLUG-
In) Program; or (c) other similar programs that are or may be funded by the Buyer’s ratepayers.
040914 jrm 0180042 7
3.0 RPS CERTIFICATION; GREEN ATTRIBUTES
3.1 CEC Certification. The Seller, at its own cost and expense, shall obtain the RPS
Certification within six (6) months of the Commercial Operation Date. The Seller shall maintain the RPS
Certification at all times during the Delivery Term. The foregoing provision notwithstanding, the Seller
shall not be in breach of this Agreement and the Buyer shall not have the right to terminate this Agreement,
if the Seller’s failure to obtain or maintain the RPS Certification is due to a change in California law,
occurring after the Commercial Operation Date, so long as the Seller has used commercially reasonable
efforts to obtain and maintain the RPS Certification and the Seller’s actions or omissions did not contribute
to its inability to obtain and maintain the RPS Certification.
3.2 Obligation to Deliver Green Attributes. The Seller shall sell and deliver to the Buyer, and
the Buyer shall buy and receive from the Seller, all right, title, and interest in and to Green Attributes
associated with Energy, produced by the Facility and delivered to the Buyer at the Delivery Point, whether
now existing or that hereafter come into existence during the Term, except as otherwise excluded herein;
provided, the Buyer shall not be obligated to purchase and pay the Seller for any Green Attributes
associated with any amount of the Output, that is generated by any fuel which is not renewable and which
cannot be counted for the purpose of the production of Green Attributes. The Seller agrees to sell and make
all such Green Attributes available to the Buyer to the fullest extent allowed by applicable law, in
accordance with the terms and conditions of this Agreement. The Seller warrants that the Green Attributes
provided under this Agreement to the Buyer shall be free and clear of all liens, security interests, claims
and encumbrances.
3.3 Conveyance of Green Attributes. The Seller shall provide Green Attributes associated
with the Facility, which shall be documented and conveyed to the Buyer in accordance with the procedure
described in Exhibit “PPA-D.”
3.4 Additional Evidence of Green Attributes Conveyance. At the Buyer’s request, the Seller
shall provide additional reasonable evidence to the Buyer or to third parties of the Buyer’s right, title, and
interest in the Green Attributes and any other information with respect to Green Attributes, as may be
requested by the Buyer.
3.5 Modification of Green Attributes Conveyance Procedure. The Buyer may unilaterally
modify Exhibit “PPA-D” in order to reflect changes necessary in the Green Attributes conveyance
procedures, so that the Buyer may be able to receive and report the Green Attributes, purchased under this
Agreement, as belonging to the Buyer.
3.6 Reporting of Ownership of Green Attributes. The Seller shall not report to any person or
entity that the Green Attributes sold and conveyed to the Buyer belong to any person other than the Buyer.
The Buyer may report under any applicable program that Green Attributes purchased by the Buyer
hereunder belong to it.
3.7 Greenhouse Gas Emissions. The Seller shall comply with any laws and/or regulations
regarding the need to offset emissions of GHGs by delivering to the Buyer the Energy from the Facility
with a net zero GHG impact.
4.0 CONVEYANCE OF CAPACITY ATTRIBUTES
4.1 Conveyance of Resource Adequacy Capacity. The Seller shall not report to any person or
entity that the Resource Adequacy Capacity, as defined in the CAISO Tariff) associated with the Facility,
if any, belongs to a person other than the Buyer, which may report that Resource Adequacy Capacity
purchased hereunder belongs to it to fulfill the Resource Adequacy requirements, as defined in Section 40
of the CAISO Tariff, as amended, or any successor program. The Seller shall take those actions described
in Section 6.0 hereof, as applicable, to secure recognition of Resource Adequacy Capacity by the CAISO.
4.2 Conveyance of Other Capacity Attributes. In addition to the obligations imposed on the
040914 jrm 0180042 8
Seller under Section 4.1, the Seller will undertake any and all actions reasonably needed to enable the
Buyer to effect the recognition and transfer of any Capacity Attributes in addition Resource Adequacy, to
the extent that such Capacity Attributes exist now or will exist in the future; provided, if such actions
require any actions beyond the giving of notice by the Seller, then the Buyer shall reimburse all out-of-
pocket costs and charges of such actions.
4.3 Reporting of Ownership of Capacity Attributes. The Seller shall not report to any person
or entity that the Capacity Attributes sold and conveyed to the Buyer belong to any person other than the
Buyer. The Buyer may report under any such program that such Capacity Attributes purchased hereunder
belong to it.
5.0 METERING AND OPERATIONS
5.1 Timing of Outages. The Seller may not schedule or take any Planned Outage from 12:00
p.m. through 7:00 p.m. Pacific Time during the months of June through October.
5.2 Outage Reporting.
5.2.1 Buyer Request. The Seller is not required to report any Planned Outage or Forced
Outage, unless the Buyer first submits a written request to the Seller to commence Outage
reporting. Upon receipt of such a request, the Seller shall report all subsequent Planned Outages
and the Forced Outages according to the procedures described in subsections 5.2.2 and 5.2.3, and
shall continue such reporting until (a) the termination of this Agreement for any reason, or (b) the
Buyer subsequently provides written notice to the Seller that the Seller may cease such reporting
in the future.
5.2.2 Planned Outage Notifications. The Seller shall notify the Buyer at least 72 hours in
advance of any Planned Outage that would result in a reduction in the effective Output of the
Facility during the period over which the Planned Outage is scheduled. Notification shall be
provided by e-mail to the e-mail address (or addresses) set forth in Exhibit “PPA-F.”
5.2.3 Forced Outage Notifications. Within 24 hours of the occurrence of a Forced
Outage of the Facility that impacts the ability of the Facility to produce Energy, the Seller shall
notify the Buyer of the Forced Outage, including the Capacity of the Facility that is impacted, and
the expected duration of the Forced Outage. Within 24 hours of the return of the Facility to service
following the Forced Outage, the Seller shall notify the Buyer of the return-to-service details.
Notification shall be made by e-mail to the address (or addresses) set forth in Exhibit “PPA-F.”
5.3 Metering. The Buyer shall furnish and install one or more standard watt-hour meters to
read Energy generated by the Facility, and it will charge a meter fee to the Seller to cover the costs
associated with the meter’s purchase and installation. As requested, the Seller shall provide and install a
meter socket in accordance with the Buyer’s metering standards. The Buyer reserves the right to install
additional metering equipment at its sole cost and expense.
6.0 PARTICIPATING GENERATORS
6.1 Applicability. This Section 6.0 shall apply if the Facility meets the definition of a
“Participating Generator,” as may be defined by the CAISO Tariff. This Section 6.0 shall not apply if the
definition applies to the Facility only upon the election by the Seller. For the purposes of this Section 6.0,
all special terms not otherwise defined in Section 1.0 are defined in the CAISO Tariff.
6.2 Participating Generator Agreement. The Buyer will notify the CAISO of the Seller’s
interconnection to Buyer’s Distribution System. If the CAISO requires it, the Seller, at its own expense,
shall negotiate and enter in to two contracts, a “Participating Generator Agreement” and a “Meter Services
Agreement for CAISO Metered Entities,” with the CAISO.
040914 jrm 0180042 9
6.3 Scheduling Coordination. If the CAISO requires the Seller to enter in to a Participating
Generator Agreement, then the Seller shall designate NCPA as the Buyer’s scheduling coordinator. The
Buyer, acting in its sole discretion, may replace NCPA as the scheduling coordinator for the Facility. If
NCPA ceases to be the scheduling coordinator for the Facility and the Buyer has not, upon fourteen (14)
days’ prior written notice of inquiry from the Seller, appointed a replacement scheduling coordinator, then
the Seller shall have the right to appoint a replacement scheduling coordinator on the Buyer’s behalf.
Thereafter, the Buyer shall enter into all reasonable and appropriate agreements with such replacement
scheduling coordinator at its own costs.
6.4 Scheduling Procedure. The Buyer may require the Seller to provide the Buyer with
Energy forecasts on a periodic basis, as may be necessary for the Buyer to account for expected Facility
generation in its daily power scheduling process. The requirements are set forth in Exhibit “PPA-C.”
6.5 Modification of Scheduling and Outage Notification Procedure. The Buyer may
unilaterally modify Exhibit “PPA-C” to reflect changes necessary in the scheduling and Outage notification
procedures. The Buyer shall give the Seller reasonable notice of any such changes.
6.6 Provision of Other Equipment. If the Seller is required to enter into a Participating
Generator Agreement with the CAISO, then the Seller, at its own cost and expense, shall provide and
maintain data transmission-grade phone line and telecommunications equipment at the meter location that
complies with applicable requirements of the CAISO, the Buyer, and NCPA. Any meter installed by the
Seller shall comply at all times with the CAISO’s metering requirements. If the Seller fails to provide or
maintain any such required equipment or data connection, then the Buyer shall acquire, install and maintain
the same at the Seller’s sole cost and expense.
6.7 Designation as Resource Adequacy Resource. The Buyer may submit a written request
to the Seller to obtain the CAISO’s designation of the Facility as a Resource Adequacy Resource. Upon
receipt of such request, the Seller shall provide such information and undertake such steps as may be
required by the CAISO in order to complete such an assessment. If the Buyer makes such a request, then
the Buyer shall be responsible for the following: (1) any costs charged to the Seller by the CAISO as a
condition of applying for or receiving designation as a Resource Adequacy Resource, including any
deposits required during the study process or the cost of any related studies or deliverability assessments
performed by the CAISO; (2) the capital, installation, and maintenance costs of any additional equipment
required by the CAISO as a condition of receiving designation as a Resource Adequacy Resource; (3) the
costs of any Network Upgrades, as defined in the CAISO Tariff, as may be required by the CAISO,
provided, the Buyer shall receive any subsequent repayments from the CAISO or the Participating
Transmission Owner related to such upgrades; and (4) any charges or penalties assessed by the CAISO as a
consequence of the Facility’s designation as a Resource Adequacy Resource.
6.8 CAISO Charges. The Buyer shall be solely responsible for paying all costs and charges
associated with the receipt of Energy under this Agreement, at the Delivery Point, and for the transmission
and delivery of Energy from the Delivery Point to any other point downstream of the Delivery Point,
including transmission costs and charges, competition transition charges, applicable control area service
charges, transmission congestion charges, inadvertent energy flows, any other CAISO charges related to
the transmission of such Energy by the CAISO and any charge assessed or collected in the future pursuant
to any utility tariff or rate schedule, however defined, for transmission or transmission-related service
rendered by or for any transmission-owning or operating entity. The Seller will undertake any and all
actions reasonably needed to allow the Buyer to comply with any obligations, and minimize any potential
liability, under the CAISO tariff. If and to the extent that the Seller fails to comply with the notice
provision in Exhibit “PPA-C,” concerning Outages, or with its obligations as outlined in the previous
sentence, the Seller shall be wholly responsible for all imbalances, deviations, or any other CAISO charges
or penalties associated with such Outage or other CAISO Tariff obligation.
6.9 Inclusion in Metered Subsystem. At the option of the Buyer, the Facility may be
included within NCPA’s metered sub-system in connection with the scheduling of power over the CAISO
grid and related functions; provided, however, that such inclusion shall have no adverse effect on the
Facility’s operations or the Seller (or any such effect shall be fully mitigated by the Buyer). The Seller will
undertake any and all actions reasonably needed to allow the Buyer to comply with any obligations, and
040914 jrm 0180042 10
minimize any potential liability, under the CAISO Tariff; provided, that if such actions require any actions
beyond the giving of notice to be provided by the Buyer, then the Buyer shall reimburse the Seller for all
out-of-pocket costs and charges of such actions.
7.0 COMMERCIAL OPERATION DATE; REFUND OF RESERVATION DEPOSIT
7.1 Commercial Operation Date. The Facility shall achieve Commercial Operation by the
Commercial Operation Date deadline (the “Deadline”), which is one (1) year from the Effective Date.
7.2 Reservation Deposit. The Buyer acknowledges that, as of the Effective Date or other
date established by the Buyer, the Seller has provided the Reservation Deposit to the Buyer.
7.2.1 If the Commercial Operation Date occurs on or prior to the Deadline, the Buyer
shall refund to the Seller the Reservation Deposit without interest.
7.2.2 If the Commercial Operation Date commences within seventy (70) days of the
Deadline, the Seller, as liquidated damages and not as a penalty, shall relinquish its claim to a ten
percent (10%) portion of the amount of the Reservation Deposit for every full week transpiring
between the Deadline and the Commercial Operation Date, but the total amount to be relinquished
to the Buyer shall not exceed 100% of the Reservation Deposit.
7.2.3 If the Facility has not achieved Commercial Operation within seventy (70) days of
the Deadline, then the Buyer may terminate this Agreement without liability of either Party to the
other Party by giving written notice of termination to the Seller.
7.2.4 If the Seller gives notice of termination to terminate the Agreement before
Commercial Operation occurs, then the Buyer shall refund a percentage of the Reservation
Deposit equal to the following: the percentage to be refunded will equal A/B, where A equals the
number of days between the date of the Seller’s notice of termination, received by the Buyer, and
the Deadline, and B equals the number of days between the Effective Date and the Deadline.
7.3 Return of Reservation Deposit. The Buyer shall return to the Seller the Reservation
Deposit, without interest, in the event that (a) the Buyer furnishes written notice of the costs of
interconnection (defined in the Interconnection Agreement to include the costs related to the
Interconnection Facilities and Distribution Upgrades) to the Seller and (b) within thirty (30) days of receipt
of the notice regarding costs of interconnection, the Seller provides the Buyer with written notice that the
Seller does not intend to sign the Interconnection Agreement and does intend to proceed with the project.
8.0 REPRESENTATION AND WARRANTIES; COVENANTS
8.1 Representations and Warranties. On the Effective Date, each Party represents and
warrants to the other Party that:
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8.1.1 It is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation;
8.1.2 The execution, delivery and performance of this Agreement is within its powers,
have been duly authorized by all necessary action and do not violate any of the terms and
conditions in its governing documents, any contracts to which it is a party or any law, rule,
regulation, order or the like applicable to it;
8.1.3 This Agreement and each other document executed and delivered in accordance
with this Agreement constitutes its legally valid and binding obligation enforceable against it in
accordance with its terms;
8.1.4 It is not bankrupt and there are no proceedings pending or being contemplated by it
or, to its knowledge, threatened against it which would result in it being or becoming bankrupt;
8.1.5 There is not pending or, to its knowledge, threatened against it or any of its
affiliates, if any, any legal proceedings that could materially adversely affect its ability to perform
its obligations under this Agreement; and
8.1.6 It is acting for its own account, has made its own independent decision to enter into
this Agreement and as to whether this Agreement is appropriate or proper for it based upon its
own judgment, is not relying upon the advice or recommendations of the other Party in so doing,
and is capable of assessing the merits of, and understands and accepts, the terms, conditions and
risks of this Agreement.
8.2 General Covenants. Each Party covenants that, during the Term:
8.2.1 It shall continue to be duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation;
8.2.2. It shall maintain (or obtain from time to time as required, including through
renewal, as applicable) all regulatory authorizations necessary for it to legally perform its
obligations under this Agreement; and
8.2.3 It shall perform its obligations under this Agreement in a manner that does not
violate any of the terms and conditions in its governing documents, any contracts to which it is a
party or any law, rule, regulation, order or the like applicable to it.
8.3 Covenant by Seller. The Seller covenants that, during the Term:
8.3.1 If the Eligible Renewal Energy Resource or the Facility is considered an ‘eligible
qualifying facility’ under applicable law and has a net power production capacity of greater than
one (1) megawatt, then the Seller covenants and agrees that, within thirty (30) days of the
Effective Date or longer period allowed by law, it will complete and file Form No. 556 or other
similar form with FERC as the same may be required by law.”
9.0 GENERAL CONDITIONS
9.1 Facility Care and Interconnection. During the Delivery Term, the Seller shall execute
and maintain an “Interconnection Agreement” with the Buyer, whereby the Seller shall pay and be
responsible for designing, installing, operating, and maintaining the Facility in accordance with all
applicable laws and regulations and shall comply with all applicable Buyer, WECC, FERC, and NERC
requirements, including applicable interconnection and metering requirements. The Seller shall also comply
with any modifications, amendments or additions to the applicable tariff and protocols. The Seller also shall
arrange and pay independently for any and all necessary costs under the Interconnection Agreement with
the Buyer.
040914 jrm 0180042 12
9.2 Standard of Care. The Seller shall: (a) operate and maintain the Facility in a safe manner
in accordance with its existing applicable interconnection agreements, manufacturer’s guidelines, warranty
requirements, Good Utility Practice, industry norms (including standards of the National Electrical Code,
Institute of Electrical and Electronic Engineers, American National Standards Institute, and the
Underwriters Laboratories, and in accordance with the requirements of all applicable federal, state and
local laws and the National Electric Safety Code, as such laws and code norms may be amended from time
to time; (b) obtain any governmental authorizations and permits required for the construction and operation
thereof. The Seller shall make any necessary and commercially reasonable repairs with the intent of
optimizing the availability of electricity to the Buyer. The Seller shall reimburse the Buyer for any and all
losses, damages, claims, penalties, or liability that the Buyer incurs as a result of the Seller’s failure to
obtain or maintain any governmental authorizations and permits required for the construction and operation
of the Facility throughout the Term.
9.3 Access Rights. The Buyer, its authorized agents, employees and inspectors shall have the
right to inspect the Facility on reasonable advance notice during normal business hours and for any
purposes reasonably connected with this Agreement or the exercise of any and all rights secured to the
Buyer by law, including, without limitation, its ordinances, resolutions, tariffs, utility rate schedules or
utilities rules and regulations. The Buyer shall make reasonable efforts to coordinate its emergency
activities with the safety and security departments, if any, of the Facility’s operator. The Seller shall keep
the Buyer advised of current procedures for communicating with the Facility operator’s safety and security
departments.
9.4 Protection of Property. Each Party shall be responsible for protecting its own facilities
from possible damage resulting from electrical disturbances or faults caused by the operation, faulty
operation, or non-operation of the other Party’s facilities and such other Party shall not be liable for any
such damages so caused.
9.5 Insurance. During the Term, the Seller shall obtain and maintain and otherwise comply
with the insurance requirements, as set forth in Exhibit “PPA-E.”
9.6 Buyer’s Performance Excuse; Seller Curtailment.
9.6.1 Buyer Performance Excuse. The Buyer shall not be obligated to accept or pay for
the Output during Force Majeure that affects the Buyer’s ability to accept Energy.
9.6.2 Seller Curtailment. The Buyer may require the Seller to interrupt or reduce
deliveries of Energy: (a) whenever necessary to construct, install, maintain, repair, replace,
remove, or investigate any of its equipment or part of the Buyer’s Distribution System or facilities;
or (b) if the Buyer determines that curtailment, interruption, or reduction is necessary due to a
System Emergency, as defined in the CAISO Tariff, an unplanned outage on Buyer’s Distribution
System, Force Majeure, or compliance with Good Utility Practice.
9.7 Notices of Outages. Whenever possible, the Buyer shall give the Seller reasonable notice
of the possibility that interruption or reduction of deliveries may be required.
9.8 No Additional Loads. The Seller shall not connect any loads not associated with Station
Service Loads at the location of the Facility in a manner that would reduce Energy provided from the
Facility to the Buyer hereunder. The Seller shall obtain separate retail electric service under the Buyer’s
rate schedules for the service of such additional loads.
10.0 FORCE MAJEURE
10.1 Effect of Force Majeure. A Party shall be excused from its performance under this
Agreement to the extent, but only to the extent, that its performance hereunder is prevented by Force
Majeure. A Party claiming Force Majeure shall exercise due diligence to overcome or mitigate the effects
040914 jrm 0180042 13
of Force Majeure; provided, that nothing in this Agreement shall be deemed to obligate the Party affected
by Force Majeure (a) to forestall or settle any strike, lock-out or other labor dispute against its will; or (b)
for Force Majeure affecting the Seller only, to purchase electric power to cure Force Majeure.
10.2 Remedial Action. A Party shall not be liable to the other Party if the Party is prevented
from performing its obligations hereunder due to Force Majeure. The Party rendered unable to fulfill an
obligation by reason of Force Majeure shall take all action necessary to remove such inability with all due
speed and diligence. The nonperforming Party shall be prompt and diligent in attempting to remove the
cause of its failure to perform, and nothing herein shall be construed as permitting that Party to continue to
fail to perform after that cause has been removed. Notwithstanding the foregoing, the existence of Force
Majeure shall not excuse any Party from its obligations to make payment of amounts due hereunder.
10.3 Notice of Force Majeure. In the event of any delay or nonperformance resulting from
Force Majeure, the Party directly impacted by Force Majeure shall, as soon as practicable under the
circumstances, notify the other Party, in writing, of the nature, cause, date of commencement thereof and
the anticipated extent of any delay or interruption in performance.
10.4 Termination Due to Force Majeure. If a Party will be prevented from performing its
material obligations under this Agreement for an estimated period of twelve (12) consecutive months or
longer due to Force Majeure, then the unaffected Party may terminate this Agreement, without liability of
either Party to the other, upon thirty (30) Days’ prior written notice at any time during Force Majeure.
11.0 INDEMNITY
11.1 Indemnity by the Seller. The Seller shall indemnify, defend, and hold harmless the
Buyer, its elected and appointed officials, directors, officers, employees, agents, and representatives against
and from any and all losses, claims, demands, liabilities and expenses, actions or suits, including reasonable
costs and attorney’s fees, resulting from, or arising out of or in any way connected with claims by third
parties associated with (A) (i) Energy delivered at the Delivery Point; (ii) the Seller’s operation and/or
maintenance of the Facility; or (iii) the Seller’s actions or inactions with respect to this Agreement, and (B)
any loss, claim, action or suit, for or on account of injury, bodily or otherwise, to, or death of, persons, or
for damage to or destruction of property belonging to the Buyer or other third party, excepting only such
loss, claim, action or suit as may be caused solely by the willful misconduct or gross negligence of the
Buyer, its agents, employees, directors or officers.
11.2 Indemnity by the Buyer. The Buyer shall indemnify, defend, and hold harmless the
Seller, its directors, officers, employees, agents, and representatives against and from any and all losses,
claims, demands, liabilities and expenses, actions or suits, including reasonable costs and attorney’s fees
resulting from, or arising out of or in any way connected with claims by third parties associated with acts of
the Buyer, its officers, employees, agents, and representatives, relating to: (A) Energy delivered by the
Seller under this Agreement after the Delivery Point, and (B) any loss, claim, action or suit, for or on
account of injury, bodily or otherwise, to, or death of, persons, or for damage to or destruction of property
belonging to the Seller or other third party, excepting only such loss, claim, action or suit as may be caused
solely by the willful misconduct or gross negligence of the Seller, its agents, employees, directors or
officers.
12.0 LIMITATION OF DAMAGES
EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT THERE IS NO WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL
IMPLIED WARRANTIES ARE DISCLAIMED. LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY
ARE WAIVED UNLESS EXPRESSLY HEREIN PROVIDED. NEITHER PARTY SHALL BE LIABLE
FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES,
LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR
040914 jrm 0180042 14
CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. UNLESS EXPRESSLY
HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF SECTION 11 (INDEMNITY), IT IS
THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES
AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.
13.0 NOTICES
Notices shall, unless otherwise specified herein, be given, in writing, and may be delivered by
hand delivery, United States mail, overnight courier service, facsimile or electronic messaging (e-mail) to
the addresses set forth in Exhibit “PPA-F.”. Whenever this Agreement requires or permits delivery of a
“notice” (or requires a Party to “notify”), the Party with such right or obligation shall provide a written
communication in the manner specified below. A notice sent by facsimile transmission or electronic mail
will be recognized and shall be deemed received on the Business Day on which such notice was transmitted
if received before 5 p.m. Pacific Time (and if received after 5 p.m., on the next Business Day) and a notice
by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent
or such earlier time as is confirmed by the receiving Party unless it confirms a prior oral communication, in
which case any such notice shall be deemed received on the day sent. A Party may change its addresses by
providing notice of same in accordance with this provision. A Party may request a change to Exhibit “PPA-
F” as necessary to keep the information current.
14.0 TERM, TERMINATION EVENT AND TERMINATION
14.1 Term. The Term shall commence upon the execution by the duly authorized representatives
of each of the Parties, and shall remain in effect until the conclusion of the Delivery Term, unless
terminated sooner pursuant to the terms and conditions of this Agreement. All indemnity rights shall
survive the termination of this Agreement for twelve (12) months.
14.2 Delivery Term. The Delivery Term of the Agreement is _______ years and is defined as
the period of time from the Commercial Operation Date through the expiration or early
termination of this Agreement.
14.3 Termination Event.
14.3.1 The Buyer shall have the right, but not the obligation, to terminate this Agreement
upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The
Facility has not achieved Commercial Operation within seventy (70) days following the Deadline;
(b) After the Commercial Operation Date, the Seller has not sold or delivered Energy from the
Facility to the Buyer for a period of twelve (12) consecutive months; (c) If the Facility does not
obtain RPS Certification within six (6) months of the Commercial Operation Date and maintain
RPS Certification as required by Section 3.2; or (d) The Seller breaches any other material
obligation of this Agreement.
14.3.2 The Seller shall have the right, but not the obligation, to terminate this Agreement
upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The
Buyer fails to make a payment due and payable under this Agreement within thirty (30) days after
written notice that such payment is due; or (b) The Buyer breaches any other material obligation
of this Agreement. The preceding sentence notwithstanding, the Seller may terminate this
Agreement without cause at any time prior to the Commercial Operation Date, subject to the
provisions of Section 7 of this Agreement.
14.4 Time to Cure. None of the events described in Section 14.2.1 and 14.2.2 shall constitute
a Termination Event if the Buyer or the Seller cures the event, failure, or circumstance within thirty (30)
days after receipt of written notification sent by the other Party, seeking termination, or such longer period
as may be necessary to cure so long as the Party subject to the Terminating Event is exercising diligent
efforts to cure.
14.5 Termination.
040914 jrm 0180042 15
14.5.1 Declaration of a Termination Event. If a Termination Event has occurred and is
continuing, the Party with the right to terminate shall have the right to: (a) send notice, designating
a day, no earlier than thirty (30) days after such notice is deemed to be received (as provided in
Section 13), as an early termination date of this Agreement (the “Early Termination Date”), unless
the Seller has timely communicated with the Buyer and the Parties have agreed to resolve the
circumstances giving rise to the Termination Event; (b) accelerate all amounts owing between the
Parties; and (c) terminate this Agreement and end the Delivery Term effective as of the Early
Termination Date.
14.5.2 Release of Liability for Termination Event. Upon termination of this Agreement
pursuant to this section neither Party shall be under any further obligation or subject to liability
hereunder, except with respect to the indemnity provision in Section 11 hereof, which shall remain
in effect for a period of 12 months following the Early Termination Date.
14.6 No Limitation on Damages. Nothing in this Agreement shall be deemed or construed to
limit a Party’s right to recover damages from the other Party, except as otherwise provided in this
Agreement.
15.0 RELEASE OF DATA
Except as may be exempt from disclosure under applicable law, the Seller authorizes the Buyer to
release to any regulatory authority having jurisdiction over the Facility or a Party, or to any request made
pursuant to the California Constitution or the California Public Records Act, information regarding the
Facility, including the Seller’s name and location, operational characteristics, the Term of this Agreement,
the Facility resource type, the scheduled Commercial Operation Date, the actual Commercial Operation
Date, the Contract Capacity, payments made to the Seller and Energy production information. The Seller
acknowledges that this information may be made publicly available.
16.0 ASSIGNMENT
Neither Party shall assign this Agreement or its rights hereunder without the prior written consent
of the other Party, which consent shall not be unreasonably withheld.
16.1 Upon the written request of the Seller, the Buyer will execute a “Lender Consent and
Agreement” between the Seller and the Seller’s lender(s), if any, in the form acceptable to the Parties;
provided, for illustration purposes only, an exemplar is attached hereto as Exhibit “PPA-G.”
16.2 Notwithstanding the foregoing, no Consent and Agreement shall be required for:
16.2.1 Any assignment or transfer of this Agreement by the Seller to an affiliate of the
Seller, provided that such affiliate’s creditworthiness is equal to or better than that of Seller, as
reasonably determined by the non-assigning or non-transferring Party; or
16.2.2 Any assignment or transfer of this Agreement by the Seller or the Buyer to a
person succeeding to all or substantially all of the assets of such Party, provided that such person’s
creditworthiness is equal to or greater than that of such Party, as reasonably determined by the
non-assigning or non-transferring Party.
16.2.3 Notification of any assignment or transfer of this Agreement under Section 16.2.1
or 16.2.2 shall be given to the non-assigning or non-transferring Party in accordance with Exhibit
“PPA-F.”
17.0 APPLICABLE LAW, VENUE, ATTORNEYS’ FEES, AND INTERPRETATION
This Agreement will be governed by and construed in accordance with the laws of the State of
California. The Parties will comply with applicable laws pertaining to their obligations arising under this
040914 jrm 0180042 16
Agreement. In the event that an action is brought, the Parties agree that trial of such action will be vested
exclusively in the state courts of California or in the United States District Court for the Northern District
of California in the County of Santa Clara, State of California. The prevailing party in any action brought to
enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in
connection with that action. If a court of competent jurisdiction finds or rules that any provision of this
Agreement, the Exhibits, or any amendment thereto is void or unenforceable, the unaffected provisions of
this Agreement, the Exhibits, or any amendment thereto will remain in full force and effect. The Parties
agree that the normal rule of construction to the effect that any ambiguity is to be resolved against the
drafting party will not be employed in the interpretation of this Agreement or any Exhibit or any
amendment thereof.
18.0 SEVERABILITY
If any provision in this Agreement is determined to be invalid, void or unenforceable by any court
having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other
provision, agreement or covenant of this Agreement and the Parties shall use their best efforts to modify
this Agreement to give effect to the original intention of the Parties.
19.0 COUNTERPARTS; INTERPRETATION OF CONFLICTING PROVISIONS
This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original and all of which shall be deemed one and the same Agreement. Delivery of an executed
counterpart of this Agreement by facsimile or portable document format (“PDF”) transmission will be
deemed as effective as delivery of an originally executed counterpart. Each Party delivering an executed
counterpart of this Agreement by facsimile or PDF transmission will also deliver an originally executed
counterpart, but the failure of any Party to deliver an originally executed counterpart of this Agreement will
not affect the validity or effectiveness of this Agreement. In the event of a conflict between the Agreement
and any, some or all of the Exhibits, the document imposing the more specific duty or obligation will
prevail.
20.0 GENERAL
No amendment to or modification of this Agreement shall be enforceable unless reduced to writing and
executed by both Parties. This Agreement shall not impart any rights enforceable by any third party other
than a permitted successor or assignee bound to this Agreement. Waiver by a Party of any default by the
other Party shall not be construed as a waiver of any other default. The headings used herein are for
convenience and reference purposes only.
//
//
//
//
//
//
040914 jrm 0180042 17
21. EXHIBITS
The following exhibits shall be deemed incorporated in and made a part of this Agreement.
Exhibit “PPA-A” - Facility Description, Prices, and Reservation Deposit
Exhibit “PPA-B” - Commercial Operation Date Confirmation Letter
Exhibit “PPA-C” - Scheduling and Outage Notification Procedure
Exhibit “PPA-D” - Green Attributes Reporting and Conveyance Procedures
Exhibit “PPA-E” - Insurance Requirements
Exhibit “PPA-F” - Notices
Exhibit “PPA-G” - Form of Lender Consent and Agreement
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their
authorized representatives as of the Effective Date.
CITY OF PALO ALTO SELLER
APPROVED AS TO FORM
Senior Deputy City Attorney
APPROVED
City Manager
Director of Utilities
040914 jrm 0180042 18
EXHIBIT “PPA-A”
Facility Description, Rates, and Reservation Deposit
Program Rates
Contract Term: Twenty (20) or twenty-five (25) years
Contract rate: $0.165 per kWh for solar resources, 20- or 25-year contract term (up to 3 MW
program capacity)
$0.089 per kWh for solar resources, 20-year contract term (beyond 3 MW)
$0.091 per kWh for solar resources, 25-year contract term (beyond 3 MW)
$0.084 per kWh for non-solar resources, 20-year contract term
$0.085 per kWh for non-solar resources, 25-year contract term
Pre-certification rate: $0.08 per kWh
Reservation Deposit
Reservation Deposit ($20/kW of Contract Capacity) $
Service address:
Facility Description:
Contract Capacity: kW (CEC-AC), based on solar array rating (Panel rated
output at PV USA test conditions x inverter efficiency)
Facility primary fuel/technology:
040914 jrm 0180042 19
EXHIBIT “PPA-B”
Commercial Operation Date Confirmation Letter
In accordance with the terms of the Power Purchase Agreement (Palo Alto CLEAN), dated
(the “Agreement”) by and between the City of Palo Alto, as the Buyer, and
, as the Seller, this Confirmation Letter serves to
document the Parties’ agreement that (i) the conditions precedent to the occurrence of the Commercial
Operation Date have been satisfied, and (ii) the Buyer has received Energy, as specified in the Agreement,
as of , . The actual installed Contract Capacity is kW.
This Confirmation Letter shall confirm the Commercial Operation Date, as defined in the Agreement, as of
the date referenced in the preceding sentence.
IN WITNESS WHEREOF, each Party has caused this letter to be duly executed by its authorized
representative as of the date of last signature provided below:
Buyer Seller
By: By:
Name: Name:
Title: Director of Utilities Title:
Date: Date:
In recognition of the Commercial Operation Date relative to the Effective Date of the Agreement by
and between the Buyer and the Seller, the Seller hereby calculates the amount to return, if any, of the
Seller’s deposit, as follows:
Original Reservation Deposit Amount: $
Commercial Operation Date Deadline:
□ Commercial Operation Date is prior to Deadline
□ Commercial Operation Date occurred weeks following the Deadline, meaning that %
of the Reservation Deposit is relinquished by Seller per Section 7.2.2 of the Power Purchase
Agreement.
Amount (if any) of Reservation Deposit to return to the Seller is: $
040914 jrm 0180042 20
EXHIBIT “PPA-C”
Scheduling and Outage Notification Procedure
C.1 Applicability. This Exhibit” PPA-C” shall apply if the Facility is subject to Section 6.0
of this Agreement.
C.2 Annual Operations Forecast
C.2.1 By the tenth (10th) day September of each calendar year, the Seller will provide
NCPA with an annual operations forecast detailing hourly expected generation and all proposed
planned Outages for the next calendar year. The annual operations forecast for the calendar year
shall be provided by not later than ninety (90) days prior to the scheduled Commercial Operation
Date of the Generating Facility.
C.2.2 NCPA may request modifications to the annual operations forecast at any time,
and the Seller shall use good faith efforts to accommodate the requested modifications.
C.2.3 The Seller shall not conduct Planned Outages at times other than as set forth in
its annual operations forecast, unless approved in advance by NCPA, which approval shall not be
withheld or delayed unreasonably.
C.2.4 The Seller shall not schedule or conduct Planned Outages from 12:00 p.m.
through 7:00 p.m. Pacific Time during the months of June through October.
C.3. Short Term Operations Forecasts
C.3.1. Quarterly Operations Forecast
C.3.1.1 By the fifth (5th) day of January, April and July of each Contract Year,
the Seller shall provide a calendar quarter-operations forecast by hour of expected
generation and all proposed Planned Outages for the next full calendar quarter and the
twelve (12) months following that calendar quarter. As an example, by January 5, 2014,
the Seller would provide a calendar quarter-operations forecast by hour of expected
generation for the period, April 1, 2014 through June 30, 2014, and identify all proposed
Planned Outages for the period, April 1, 2014 through June 30, 2015.
C.3.1.2 NCPA will approve or require modifications to the proposed calendar
quarter-operations forecast within ten (10) days of receipt of the forecast.
C.3.1.3 If required by NCPA, the Seller will provide a modified calendar
quarter-operations forecast within seven (7) days after receipt of required modifications
from NCPA.
C.3.2 Weekly Update
C.3.2.1 By 14:00 of each Wednesday, the Seller shall provide an electronic
update, in a format specified by NCPA, to the calendar quarter-operations forecast for the
following seven (7) days (Thursday through the next Wednesday).
C.3.2.2 The weekly update shall include hourly expected generation and all
proposed planned Outages for the relevant seven (7) day period.
C.4 Outage Detail for Annual and Short Term Operations Forecasts. Outage information
provided by the Seller shall include, at a minimum, the start time and stop time of the Outage, capacity out
of service (kW), the equipment that is or will be out of service, and the reason for the Outage.
040914 jrm 0180042 21
C.5 General Scheduling Protocols
C.5.1 Daily Modifications to Forecasts. Unless otherwise mutually agreed, the Seller
may make changes to the weekly update to the calendar quarter-operations forecast by providing
such changes to NCPA prior to 08:00 of the day that is two (2) Business Days before the active
scheduling day as determined by the WECC prescheduling calendar. Example: For power that is
scheduled for generation or delivery on Friday, March 29, 2014, changes must be submitted to
NCPA by 08:00 on Wednesday, March 27, 2014.
C.5.2 Hourly Modifications to Active Schedules. Unless otherwise mutually agreed,
the Seller may request changes to active schedules by providing such changes to NCPA with a
minimum of four (4) hours’ notice prior to the applicable CAISO market deadline (e.g. Hour
Ahead Scheduling Process (“HASP”) Scheduling deadline, as defined in the CAISO Tariff).
Active day Schedule changes are not binding. Changes to active Schedules are limited to two (2)
changes per day, excluding forced Outages, unless otherwise agreed to between the Parties. One
request for a Schedule change, of one-hour or multiple-hours duration, constitutes one Schedule
change. Example: For power that is scheduled for generation or delivery in hour ending 15:00 (for
the period from 14:01 to 15:00), changes must be submitted to NCPA by 10:00.
C.5.3. Unforeseen Circumstances. At the Seller’s request, NCPA may, but is not
required to, modify the Schedules for the Generation Facility Output due to unforeseen
circumstances in accordance with the above scheduling timeline constraints described in this
Exhibit PPA-C.
C.5.4. Absence of Forecasts. In the absence of forecasts and schedules as required by
this Agreement or this Exhibit, NCPA shall utilize the most current information the Seller
provides in the development and submission of Schedules.
C.6 Outage Reporting Protocols
C.6.1. Notification. The Seller shall notify NCPA of all planned or forced Outages of
the Generating Facility to ensure compliance with the CAISO Outage Coordination and
Enforcement Protocols.
C.6.1.1 Outage information provided by the Seller shall include, at a minimum,
the start time and stop time of the Outage, Capacity out of service (kW), equipment out of
service, and the reason for the Outage.
C. 6.1.2 Seller shall provide the Planned Outages not included in the annual
operations forecast, the calendar quarter-operations forecast, or the weekly update, to
NCPA at least four (4) Business Days prior to the start of the requested outage.
C. 6.1.3 At any time prior to the start of a Planned Outage, the CAISO may
deny the Outage due to a System Emergency (as defined in the CAISO Tariff) or as
otherwise permitted under the CAISO Tariff. If NCPA receives notice that the CAISO
has denied an Outage in accordance with the CAISO Tariff, NCPA will notify the Seller
as soon as possible and the Seller shall modify the planned Outage as required by the
CAISO.
C.6.2 Commencement of an Outage. The Seller shall not begin any Planned Outage
without the prior approval of NCPA and the CAISO.
C.6.3 Forced Outages
C.6.3.1 The Seller shall report the Forced Outages to NCPA within twenty (20)
040914 jrm 0180042 22
minutes of such Outages.
C.6.3.2 The Seller’s notice of a Forced Outage sent to NCPA shall include the
reason for the Outage (if known), expected duration of the Outage, and the Capacity
reduction.
C.6.3.3 By the end of the next Business Day following the day on which a
Forced Outage has occurred, the Seller shall provide to NCPA a detailed written report,
specifying the reason for the Outage, expected duration of such Outage, capacity
reduction, and actions taken to mitigate such Outage.
C.6.4 Return to Service. The Seller shall notify NCPA as soon as possible, but in any
case before the Generating Facility is returned to service.
C.7 Notices. All Scheduling notices and Schedules shall be submitted to NCPA by phone,
fax or email, or other means as may be mutually agreed by the Parties, to the persons designated in Exhibit
“PPA-F.”
C.8 Changes in Scheduling and Outage Procedure. The Buyer shall revise Exhibit “PPA-C,”
or, as appropriate, give written notice to the Seller regarding the revision, and issue a new Exhibit
“PPA-C,” which shall then become part of the Agreement to reflect changes in the scheduling and outage
notification procedure.
040914 jrm 0180042 23
EXHIBIT “PPA-D”
Green Attributes Reporting and Conveyance Procedures
D.1 Additional Definitions for the Conveyance of Green Attributes
D.1.1 “Certificate Transfers” means the process, as described in the WREGIS
Operating Rules, whereby a WREGIS account holder may request that WREGIS Certificates from
a specific generating unit shall be directly deposited to another WREGIS account.
D.1.2 “WREGIS Certificates” means a certificate created within the WREGIS system
that represents all Renewable and Green Attributes from one MWh of electricity generation from
an Eligible Renewable Energy Resource that is registered with WREGIS.
D.1.3 “WREGIS Operating Rules” means the document published by WREGIS that
governs the operation of the WREGIS system for registering, tracking, and conveying, among
others, RECs produced from Eligible Renewable Energy Resources that shall be registered with
WREGIS.
D.1.4 “WREGIS” means Western Renewable Energy Generation Information System.
D.2 RECs. Green Attributes shall be conveyed by the Seller to the Buyer through RECs,
which shall be registered tracked and conveyed to the Buyer, using WREGIS.
D.3 WREGIS Registration. Prior to the Commercial Operation Date, the Buyer will register
the Facility in the Buyer’s WREGIS account on behalf of the Seller. The Buyer shall charge back to the
Seller any costs of registering and maintaining the registration of the Facility with WREGIS. The Seller
shall provide to the Buyer any documents required by WREGIS and assign the Seller’s rights to register the
Facility in WREGIS, using agreements provided by WREGIS.
D.4 B u yer ’s W REGI S Acco unt . The Buyer shall, at its sole expense, establish and maintain
the Buyer’s WREGIS account sufficient to accommodate the WREGIS Certificates produced by the output
of the Facility. The Buyer shall be responsible for all expenses associated with (A) establishing and
maintaining the Buyer’s WREGIS Account, and (B) subsequently transferring or retiring WREGIS
Certificates.
D.5 Qualified Reporting Entity. The Buyer shall be the Qualified Reporting Entity (as such
term is defined by WREGIS) for the Facility, and shall be responsible for providing the metered Output
data to WREGIS.
D.6 Reporting of Environmental Attributes. In lieu of the Seller’s transfer of the WREGIS
Certificates using Certificate Transfers from the Seller’s WREGIS account to the Buyer’s WREGIS
account, the Buyer shall report the Facility as being held directly in its WREGIS account, which will
preclude the Seller from reporting the Facility in its own WREGIS account.
D.6.1 By avoiding the use of Certificate Transfers, there will be no transaction costs to
the Seller or the Buyer for the Certificate Transfers that would otherwise be used.
D.6.2 WREGIS Certificates for the Facility will be created on a calendar month basis
in accordance with the certification procedure established by the WREGIS Operating Rules in an
amount equal to the Energy generated by the Project and delivered to the Buyer in the same
calendar month.
D.6.3 WREGIS Certificates will only be created for whole MWh amounts of energy
generated. Any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient
generation is accumulated for the creation of a WREGIS Certificate and all such accumulated
040914 jrm 0180042 24
MWh of Environmental Attributes will then be available to Buyer.
D.6.4 If a WREGIS Certificate Modification (as such term is defined by WREGIS)
will be required to reflect any errors or omissions regarding the Green Attributes from the Facility,
then the Buyer will manage the submission of the WREGIS Certificate Modification.
D.6.5 Due to the expected delay in the creation of WREGIS Certificates relative to the
timing of invoice payments under Section 2, the Buyer will normally be making an invoice
payment for the Output for a given month in accordance with Section 2 before the WREGIS
Certificates for such month may be created in the Buyer’s WREGIS account. Notwithstanding this
delay, the Buyer shall have all right and title to all such WREGIS Certificates upon payment to the
Seller in accordance with Section 2.
D.7 Changes in Green Attributes Reporting and Conveyance Procedures. The Buyer shall
revise this Exhibit “PPA-D,” as appropriate, give written notice to the Seller regarding the revision, and
issue a new Exhibit “PPA-D,” which shall then become part of this Agreement in the event that:
D.7.1 WREGIS changes the WREGIS Operating Rules (as defined by WREGIS) after
the Effective Date or applies the WREGIS Operating Rules in a manner inconsistent with this
Exhibit “PPA-D” after the Effective Date; or,
D.7.2 WREGIS is replaced as the primary method that the Buyer uses for conveyance
of Green Attributes, or additional methods to convey all Green Attributes, are required.
040914 jrm 0180042 25
EXHIBIT “PPA-E”
Insurance Requirements
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, WILL FOR THE TERM OF THE
CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW,
AFFORDED BY COMPANIES WITH A BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR
AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED,
BELOW:
REQUIRED
TYPE OF COVERAGE
REQUIREMENT
MINIMUM LIMITS
EACH
OCCURRENCE AGGREGATE
YES
YES
WORKER’S COMPENSATION
AUTOMOBILE LIABILITY
STATUTORY
STATUTORY
YES
COMMERCIAL GENERAL
LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL
LIABILITY
BODILY INJURY
PROPERTY DAMAGE
BODILY INJURY & PROPERTY DAMAGE
COMBINED.
$1,000,000
$1,000,000
$1,000,000
$2,000,000
$2,000,000
$2,000,000
YES
COMPREHENSIVE AUTOMOBILE
LIABILITY, INCLUDING, OWNED,
HIRED, NON-OWNED
BODILY INJURY
- EACH PERSON
- EACH OCCURRENCE
PROPERTY DAMAGE
BODILY INJURY AND PROPERTY
DAMAGE, COMBINED
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
NO
PROFESSIONAL LIABILITY,
INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE
(WHEN APPLICABLE), AND
NEGLIGENT PERFORMANCE
ALL DAMAGES
$1,000,000
YES
THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: PROPOSER, AT ITS SOLE COST AND
EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY PROPOSER AND ITS SUBCONSULTANS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S
LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSURES CITY, ITS COUNCIL MEMBERS,
OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE
OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S
AGREEMENT TO INDEMNIFY CITY – SEE, SAMPLE AGREEMENT FOR SERVICES.
II. SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE, OR COMPLETE THIS
SECTION AND IV THROUGH V, BELOW.
A. NAME AND ADDRESS OF COMPANY AFFORDING COVERAGE (NOT AGENT OR BROKER):
B. NAME, ADDRESS, AND PHONE NUMBER OF YOUR INSURANCE AGENT/BROKER:
040914 jrm 0180042 26
C. POLICY NUMBER(S):
D. DEDUCTIBLE AMOUNT(S) (DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR
APPROVAL):
III. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AND
PROPOSER’S SUBMITTAL OF CERTIFICATES OF INSURANCE EVIDENCING COMPLIANCE WITH THE
REQUIREMENTS SPECIFIED HEREIN.
IV. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL
INSURES”
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS
AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY
OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSURES.
B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSURES UNDER THE POLICY
SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER,
BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL
LIABILITY OF THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE
NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY
WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM,
THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE
EFFECTIVE DATE OF CANCELLATION.
V. PROPOSER CERTIFIES THAT PROPOSER’S INSURANCE COVERAGE MEETS THE ABOVE
REQUIREMENTS:
THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. SIGNATURE(S) MUST BE
SAME SIGNATURE(S) AS APPEAR(S) ON SECTION II, ATTACHMENT A, PROPOSER’S INFORMATION FORM.
Firm:
Signature:
Name:
(Print or type name)
Signature:
Name:
(Print or type name)
040914 jrm 0180042 27
NOTICES SHALL BE MAILED TO:
PURCHASING AND
CONTRACT ADMINISTRATION
CITY OF PALO ALTO
P.O. BOX 10250
PALO ALTO, CA 94303.
040914 jrm 0180042 28
EXHIBIT “PPA-F”
Notices
Contract Administration
BUYER: SELLER:
City of Palo Alto
Utilities Resource Management
250 Hamilton Avenue
Palo Alto, CA 94301
Ph: 650-329-2689
Email: UtilityCommoditySettlements@CityofPaloAlto.Org
Billing and Settlements
BUYER: SELLER:
City of Palo Alto
Utilities Resource Management
250 Hamilton Avenue
Palo Alto, CA 94301
Ph: 650-329-2689
Email: UtilityCommoditySettlements@CityofPaloAlto.Org
Forecasting and Outage Reporting under Section 6 of this Agreement
Planned Outages:
BUYER: SELLER:
Northern California Power Agency Real-
Time Dispatch
651 Commerce Drive
Roseville, CA 95678
Ph: 916-786-3518
Forced Outages
BUYER: SELLER:
Northern California Power Agency Real-
Time Dispatch
651 Commerce Drive
Roseville, CA 95678
Ph: 916-786-3518
Forecasting and Scheduling
BUYER: SELLER:
Northern California Power Agency
Operations and Pre-Scheduling
651 Commerce Drive
Roseville, CA 95678
Ph: 916-786-0123
040914 jrm 0180042 29
EXHIBIT “PPA-G”
Form of Lender Consent and Agreement
This CONSENT AND AGREEMENT (this “Consent”), dated as of , 20 , is entered into
by and among the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”),
, a corporation (the “Lender),” by its agent,
(the “Administrative Agent”), and , a
corporation (the “Borrower”) (collectively, the “Parties”). Unless otherwise defined, all
capitalized terms have the meaning given in the Contract (as hereinafter defined).
RECITALS
A. Borrower intends to develop, construct, install, test, own, operate and use an approximately
MW electric generating facility located in the city of Palo Alto in the State of California, known as
the Project (the “Project”).
B. In order to partially finance the development, construction, installation, testing, operation and
use of the Project, Borrower has entered into that certain financing agreement dated as of
(as amended, amended and restated, supplemented or otherwise modified from time to time, the “Financing
Agreement”), among Borrower, the financial institutions from time to time parties thereto (collectively, the
“Lenders”) , and Administrative Agent for the Lenders, pursuant to which, among other things, Lenders
have extended commitments to make loans and other financial accommodations to, and for the benefit of,
Borrower.
C. The City and Borrower have entered into that certain Power Purchase Agreement, dated as of
(attached hereto and incorporated herein by reference, as amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the
“Power Purchase Agreement”).
D. The City and Borrower have entered into that certain Interconnection Agreement, dated as of
_ (attached hereto and incorporated herein by reference, as amended, amended and restated,
supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the
“Interconnection Agreement”).
E. Pursuant to a security agreement executed by Borrower and Administrative Agent for the
Lenders (as amended, amended and restated, supplemented or otherwise modified from time to time, the
“Security Agreement”), Borrower has agreed, among other things, to assign, as collateral security for its
obligations under the Financing Agreement and related documents (collectively, the “Financing
Documents”), all of its right, title and interest in, to and under the Power Purchase Agreement and
Interconnection Agreement to Administrative Agent for the benefit of itself, the Lenders and each other
entity or person providing collateral security under the Financing Documents.
F. It is a requirement under the Financing Agreement that the Parties hereto execute this Consent.
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the Parties agree, as follows:
1. CONSENT TO ASSIGNMENT. The City acknowledges the assignment referred to in Recital E
above, consents to an assignment of the Power Purchase Agreement and Interconnection Agreement
pursuant thereto, and agrees with Administrative Agent, as follows:
(a) Administrative Agent shall be entitled (but not obligated) to exercise all rights and to cure any
040914 jrm 0180042 30
defaults of Borrower under the Power Purchase Agreement or Interconnection Agreement, as the
case may be, subject to applicable notice and cure periods provided in the Power Purchase
Agreement and Interconnection Agreement. Upon receipt of notice from Administrative Agent,
the City agrees to accept such exercise and cure by Administrative Agent if timely made by
Administrative Agent under the Power Purchase Agreement or Interconnection Agreement, as the
case may be, and this Consent. Upon receipt of Administrative Agent's written instructions and to
the extent allowed by law, the City agrees to make directly to such account as Administrative
Agent may direct the City, in writing, from time to time, all payments to be made by the City to
Borrower under the Power Purchase Agreement or Interconnection Agreement, as the case may
be, from and after the City’s receipt of such instructions, and Borrower consents to any such
action. The City shall not incur any liability to Borrower under the Power Purchase Agreement,
Interconnection Agreement, or this Consent for directing such payments to Administrative Agent
in accordance with this subsection (a).
(b) The City will not, without the prior written consent of Administrative Agent (such consent not
to be unreasonably withheld), (i) cancel or terminate the Power Purchase Agreement or
Interconnection Agreement, or consent to or accept any cancellation, termination or suspension
thereof by Borrower, except as provided in the Power Purchase Agreement or Interconnection
Agreement and in accordance with subparagraph 1(c) hereof, (ii) sell, assign or otherwise dispose
(by operation of law or otherwise) of any part of its interest in the Power Purchase Agreement or
Interconnection Agreement, except as provided in the Power Purchase Agreement or
Interconnection Agreement, or (iii) amend or modify the Power Purchase Agreement or
Interconnection Agreement in any manner materially adverse to the interest of the Lenders in the
Power Purchase Agreement and Interconnection Agreement as collateral security under the
Security Agreement.
(c) The City agrees to deliver duplicates or copies of all notices of default delivered by the City
under or pursuant to the Power Purchase Agreement or Interconnection Agreement to
Administrative Agent in accordance with the notice provisions of this Consent. The City shall
deliver any such notices concurrently with delivery of the notice to Borrower under the Power
Purchase Agreement or Interconnection Agreement. To the extent that a cure period is provided
under the Power Purchase Agreement or Interconnection Agreement, Administrative Agent shall
have the same period of time to cure the breach or default that Borrower is entitled to under the
Power Purchase Agreement or Interconnection Agreement, except that if the City does not deliver
the default notice to Administrative Agent concurrently with delivery of the notice to Borrower
under the Power Purchase Agreement or Interconnection Agreement, then as to Administrative
Agent, the applicable cure period under the Power Purchase Agreement or Interconnection
Agreement shall begin on the date on which the notice is given to Administrative Agent. If
possession of the Project is necessary to cure such breach or default, and Administrative Agent or
its designee(s) or assignee(s) declare Borrower in default and commence foreclosure proceedings,
Administrative Agent or its designee(s) or assignee(s) will be allowed a reasonable period to
complete such proceedings so long as Administrative Agent or its designee(s) continue to perform
any monetary obligations under the Power Purchase Agreement or Interconnection Agreement, as
the case may be. The City consents to the transfer of Borrower's interest under the Power Purchase
Agreement and Interconnection Agreement to the Lenders or Administrative Agent or their
designee(s) or assignee(s) or any of them or a purchaser or grantee at a foreclosure sale by judicial
or nonjudicial foreclosure and sale or by a conveyance by Borrower in lieu of foreclosure and
agrees that upon such foreclosure, sale or conveyance, the City shall recognize the Lenders or
Administrative Agent or their designee(s) or assignee(s) or any of them or other purchaser or
grantee as the applicable party under the Power Purchase Agreement and Interconnection
Agreement (provided that such Lenders or Administrative Agent or their designee(s) or
assignee(s) or purchaser or grantee assume the obligations of Borrower under the Power Purchase
Agreement and Interconnection Agreement, including, without limitation, satisfaction and
compliance with all credit provisions of the Power Purchase Agreement and Interconnection
Agreement, if any, and provided further that such Lenders or Administrative Agent or their
designee(s) or assignee(s) or purchaser or grantee has a creditworthiness equal to or better than
040914 jrm 0180042 31
Borrower, as reasonably determined by City).
(d) In the event that either the Power Purchase Agreement or Interconnection Agreement, or both
is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, and if,
within forty-five (45) days after such rejection, Administrative Agent shall so request, the City
will execute and deliver to Administrative Agent a new power purchase agreement or
interconnection agreement, as the case may be, which power purchase agreement or
interconnection agreement shall be on the same terms and conditions as the original Power
Purchase Agreement or Interconnection Agreement for the remaining term of the original Power
Purchase Agreement or Interconnection Agreement before giving effect to such rejection, and
which shall require Administrative Agent to cure any defaults then existing under the original
Power Purchase Agreement or Interconnection Agreement. Notwithstanding the foregoing, any
new renewable power purchase agreement or interconnection agreement will be subject to all
regulatory approvals required by law. The City will use good faith efforts to promptly obtain any
necessary regulatory approvals.
(e) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) elect to
perform Borrower's obligations under the Power Purchase Agreement and Interconnection
Agreement, succeed to Borrower’s interest under the Power Purchase Agreement and
Interconnection Agreement, or enter into a new power purchase agreement or interconnection
agreement as provided in subparagraph 1(d) above, the recourse of the City against Administrative
Agent, Lenders or their designee(s) and assignee(s) shall be limited to such Parties’ interests in the
Project, and the credit support required under the Power Purchase Agreement and Interconnection
Agreement, if any.
(f) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) succeed to
Borrower's interest under the Power Purchase Agreement and Interconnection Agreement,
Administrative Agent, the Lenders or their designee(s) or assignee(s) shall cure any then-existing
payment and performance defaults under the Power Purchase Agreement or Interconnection
Agreement, except any performance defaults of Borrower itself, which by their nature are not
susceptible of being cured. Administrative Agent, the Lenders and their designee(s) or assignee(s)
shall have the right to assign all or a pro rata interest in the Power Purchase Agreement and
Interconnection Agreement to a person or entity to whom Borrower’s interest in the Project is
transferred, provided such transferee assumes the obligations of Borrower under the Power
Purchase Agreement and Interconnection Agreement and has a creditworthiness equal to or better
than Borrower, as reasonably determined by the City. Upon such assignment, Administrative
Agent and the Lenders and their designee(s) or assignee(s) (including their agents and employees)
shall be released from any further liability thereunder accruing from and after the date of such
assignment, to the extent of the interest assigned.
2. REPRESENTATIONS AND WARRANTIES. The City hereby represents and warrants that as
of the date of this Consent:
(a) It (i) is duly formed and validly existing under the laws of the State of California, and (ii) has
all requisite power and authority to enter into and to perform its obligations hereunder and under
the Power Purchase Agreement and Interconnection Agreement, and to carry out the terms hereof
and thereof and the transactions contemplated hereby and thereby;
(b) the execution, delivery and performance of this Consent, the Power Purchase Agreement and
the Interconnection Agreement have been duly authorized by all necessary action on its part and
do not require any approvals, material filings with, or consents of any entity or person which have
not previously been obtained or made;
(c) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement is in
full force and effect;
040914 jrm 0180042 32
(d) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement has
been duly executed and delivered on its behalf and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as the enforceability thereof
may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and (ii) general equitable principles (whether considered
in a proceeding in equity or at law);
(e) there is no litigation, arbitration, investigation or other proceeding pending for which the City
has received service of process or, to the City’s actual knowledge, threatened against the City
relating solely to this Consent, the Power Purchase Agreement, or the Interconnection Agreement
and the transactions contemplated hereby and thereby;
(f) the execution, delivery and performance by it of this Consent, the Power Purchase Agreement,
and the Interconnection Agreement, and the consummation of the transactions contemplated
hereby, will not result in any violation of, breach of or default under any term of any material
contract or material agreement to which it is a party or by which it or its property is bound, or of
any material requirements of law presently in effect having applicability to it, the violation, breach
or default of which could have a material adverse effect on its ability to perform its obligations
under this Consent;
(g) neither the City nor, to the City’s actual knowledge, any other party to the Power Purchase
Agreement or Interconnection Agreement, is in default of any of its obligations thereunder; and
(h) to the City’s actual knowledge, (i) no Force Majeure Event exists under, and as defined in, the
Power Purchase Agreement or Interconnection Agreement and (ii) no event or condition exists
which would either immediately or with the passage of any applicable grace period or giving of
notice, or both, enable either the City or Borrower to terminate or suspend its obligations under the
Power Purchase Agreement or the Interconnection Agreement.
Each of the representations and warranties set forth herein shall survive the execution and delivery
of this Consent and the consummation of the transactions contemplated hereby.
3. NOTICES. All notices required or permitted hereunder shall be given, in writing, and shall be
effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by facsimile
and (c) if otherwise delivered, upon the earlier of receipt or three (3) Business Days after being sent
registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private
courier or delivery service with charges prepaid, and addressed as specified below:
If to the City:
[ ]
[ ]
[ ]
Telephone No.: [ ]
Facsimile No.: [ ]
Attn: [ ]
If to Administrative Agent:
[ ]
[ ]
[ ]
Telephone No.: [ ]
Facsimile No.: [ ]
Attn: [ ]
040914 jrm 0180042 33
If to Borrower:
[ ]
[ ]
[ ]
Telephone No.: [ ]
Facsimile No.: [ ]
Attn: [ ]
Any party shall have the right to change its address for notice hereunder to any other location within the
United States by giving thirty (30) days written notice to the other parties in the manner set forth above.
4. ASSIGNMENT, TERMINATION, AMENDMENT. This Consent shall be binding upon and
benefit the successors and assigns of the Parties hereto and their respective successors, transferees and
assigns (including without limitation, any entity that refinances all or any portion of the obligations under
the Financing Agreement). The City agrees (a) to confirm such continuing obligation, in writing, upon the
reasonable request of (and at the expense of) Borrower, Administrative Agent, the Lenders or any of their
respective successors, transferees or assigns, and (b) to cause any successor-in-interest to the City with
respect to its interest in the Power Purchase Agreement or Interconnection Agreement to assume, in writing
and in form and substance reasonably satisfactory to Administrative Agent, the obligations of City
hereunder. Any purported assignment or transfer of the Power Purchase Agreement or Interconnection
Agreement not in conjunction with the written instrument of assumption contemplated by the foregoing
clause (b) shall be null and void. No termination, amendment, or variation of any provisions of this Consent
shall be effective unless in writing and signed by the parties hereto. No waiver of any provisions of this
Consent shall be effective unless in writing and signed by the party waiving any of its rights hereunder.
5. GOVERNING LAW. This Consent shall be governed by the laws of the State of California
applicable to contracts made and to be performed in California. The federal courts or the state courts
located in California shall have exclusive jurisdiction to resolve any disputes with respect to this Consent
with the City, Assignor, and the Lender or Lenders irrevocably consenting to the jurisdiction thereof for
any actions, suits, or proceedings arising out of or relating to this Consent.
6. COUNTERPARTS. This Consent may be executed in one or more duplicate counterparts, and
when executed and delivered by all the parties listed below, shall constitute a single binding agreement.
7. SEVERABILITY. In case any provision of this Consent, or the obligations of any of the Parties
hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining
provisions, or the obligations of the other Parties hereto, shall not in any way be affected or impaired
thereby.
8. ACKNOWLEDGMENTS BY BORROWER. Borrower, by its execution hereof, acknowledges
and agrees that neither the execution of this Consent, the performance by the City of any of the obligations
of the City hereunder, the exercise of any of the rights of the City hereunder, or the acceptance by the City
of performance of the Power Purchase Agreement by any party other than Borrower shall (1) release
Borrower from any obligation of Borrower under the Power Purchase Agreement or Interconnection
Agreement, (2) constitute a consent by the City to, or impute knowledge to the City of, any specific terms
or conditions of the Financing Agreement, the Security Agreement or any of the other Financing
Documents, or (3) except as expressly set forth in this Consent, constitute a waiver by the City of any of its
rights under the Power Purchase Agreement or Interconnection Agreement. Borrower and Administrative
Agent acknowledge hereby for the benefit of City that none of the Financing Agreement, the Security
040914 jrm 0180042 34
Agreement, the Financing Documents or any other documents executed in connection therewith alter,
amend, modify or impair (or purport to alter, amend, modify or impair) any provisions of the Power
Purchase Agreement.
CITY OF PALO ALTO ADMINISTRATIVE AGENT
APPROVED AS TO FORM
Senior Deputy City Attorney
BORROWER
APPROVED
City Manager
Director of Utilities
Utilities Advisory Commission Minutes Approved on: Page 1 of 3
UTILITIES ADVISORY COMMISSION MEETING
MINUTES OF NOVEMBER 2, 2016
NEW BUSINESS
ITEM 1: ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend
that the City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy Accessible
Now (CLEAN) Program and Amend Associated Program Rules: (1) for Local Solar Resources with
a Tiered Pricing Structure Starting at 16.5 ¢/kWh to a 3 MW Cap Which Declines to the City’s
Avoided Cost Value Upon Receiving 6 MW of Program Capacity; and (2) for Local Non-Solar
Resources With No Capacity Limit at a Price of 8.4 ¢/kWh to 8.5 ¢/kWh
Assistant Director Jane Ratchye provided a presentation summarizing the written report. She
noted the history of the Palo Alto CLEAN program, including the Council confirming the 16.5
cents per kilowatt-hour (¢/kWh) price for local solar many times since December 2012. Ratchye
noted that the program has received applications this year totally about 1.5 megawatts (MW)
and that another customer is interested in the program for a large system. She said that the
program cap is 3 MW and that the new customer is determining how big a system to install and
could use up the remaining available capacity. That customer is interested in what the program
price for capacity in excess of the 3 MW cap.
Ratchye noted that since the program was launched in 2012, the avoided cost of local solar
(including the cost of the energy, the environmental attributes, local capacity value,
transmission and ancillary service value, avoided transmission and distribution system losses,
and congestion value) has declined to the current avoided cost of 8.9 ¢/kWh for a 20-year
contract. She said that the avoided cost of local non-solar renewable supplies has increased
from last year from 8.1 ¢/kWh to 8.4 ¢/kWh for a 20-year contract.
Ratchye described staff’s recommendation, which is to continue the 16.5 ¢/kWh price for the
first 3 MW of local solar projects, but to expand the program while lowering the price until 6
MW of capacity is reached, then reducing the price to the avoided cost value. She said that the
proposal is to reduce the price to 14 ¢/kWh for the 4th MW, 12 ¢/kWh for the 5th MW, and 10
¢/kWh for the 6th MW. For local non-solar projects, staff recommends that the price continue
at the avoided cost, which has increased to 8.4 ¢/kWh for a 20-year contract and 8.5 ¢/kWh for
a 25-year contract. The 3 MW cap would be removed for both solar and non-solar projects
since there is no rate impact when the price is equal to the avoided cost. Ratchye noted that
staff’s recommendation increases the excess cost from $380,000/year to $535,000/year, or
$10.7 million over 20 years.
Ratchye explained that staff considered several alternatives including the following:
1.Option 1 would end the program when 3 MW is reached.
DRAFT
ATTACHMENT D
Utilities Advisory Commission Minutes Approved on: Page 2 of 3
2. Option 2 would extend the program after 3 MW is reached, but reduce the price to the
avoided cost for all capacity after the first 3 MW.
3. Option 3 would end the program when the last project is added which would push the
program over the 3 MW limit.
4. Option 4 would eliminate the cap and continue the 16.5 ¢/kWh for an unlimited amount
of capacity.
Ratchye noted that in Option 3, since applications for projects totally 1.5 MW have already
been received, if the last project was sized at 3 MW, the total capacity at 16.5 ¢/kWh could be
4.5 MW, well over the existing program’s 3 MW limit.
Public Comment
Richard Cassel said that solar system developers and site owners need certainty around the
costs they may incur to install a system and that the utility should include a guarantee that the
utility will provide the interconnection.
Commissioner Forssell asked what the rate that would be provided to solar systems and how
this relates to the Net Energy Metering (NEM) program cap, which was recently raised. Ratchye
explained that NEM is for energy designed to be used at the building location, but that the
CLEAN program is a feed-in tariff program whereby all the energy generated by the solar
system is purchased by the City of Palo Alto Utilities (CPAU) under a long-term power purchase
agreement (PPA). The rate is the subject of the discussion tonight and is currently 16.5
cents/kWh for a 20- or 25-year PPA term.
Commissioner Johnston asked what non-solar local renewable energy options there are in the
City. Ratchye indicated that they are unlikely, but could include small wind generators, or an
anaerobic digester, for example.
Vice Chair Danaher asked why we would the City pay more for solar energy than its pays for
solar energy located elsewhere. He recommended that the program limit be reduced to 2 MW
and end the program early since there is no carbon benefit given the City’s electric supply
portfolio.
Chair Cook asked about the process for determining interconnection costs (to address the
question from the public). General Manager Shikada said that CPAU is working on the question
and expects to be able to figure out a path for ward for the applicant in question.
Chair Cook agreed with the commenter that certainty is key for applicants. He said that he
understands that remote solar is cheaper and that the avoided cost calculation captures the
value of local solar. He said that he is torn about the program or whether there is another
incentive for local solar that the City should offer.
Vice Chair Danaher noted that the additional $130,000/year per MW in excess cost to extend
the incentive beyond 3 MW is not the best use of ratepayer funds and that ratepayer money
could be used for other valuable purposes. He noted that applicants are not pounding on the
City’s door for this program and that there wouldn’t be a problem with stopping the program.
Commissioner Johnston asked if local solar provides resilience or reliability for the local electric
distribution system. Vice Chair Danaher noted that Commissioner Ballantine has indicated that
Utilities Advisory Commission Minutes Approved on: Page 3 of 3
the common inverters used do not allow the system to remain energized and producing energy
when there is an outage on the distribution system.
Commissioner Forssell said that the City should not reduce the system cap and should honor
the 3 MW cap in the current program. She indicated that she is supportive of reducing the
price to the avoided cost after 3 MW is reached.
Commissioner Johnston asked if there is a benefit to local solar. He said that if the contract
price is reduced to the avoided cost after reaching 3 MW, then that is effectively ending the
program after reaching 3 MW.
Vice Chair Danaher said that he didn’t believe there are any additional benefits of local solar
beyond those captured in the avoided cost calculation.
Chair Cook noted that we are still buying non-renewable power.
Vice Chair Danaher agreed that this program won’t change that. Non-renewable power will still
be needed to balance loads on certain hours, days, and months.
Chair Cook said that in normal hydro year, the City doesn’t buy brown power. He suggested
designing a program that doesn’t overcommit the renewable energy.
Vice Chair Danaher reiterated that he sees better uses for the money than overpaying for local
solar energy.
ACTION:
Chair Cook made a motion that the UAC recommend that Council raise the Palo Alto CLEAN
program price for local non-solar eligible renewable energy resources to the updated avoided
cost of such energy (8.4 ¢/kWh for a 20-year contract term, or 8.5 ¢/kWh for a 25-year contract
term), from the prior price (8.1 ¢/kWh for a 20-year contract term, or 8.2 ¢/kWh for a 25-year
contract term), and to remove the program limit of 3 MW for local non-solar eligible renewable
resources. Commissioner Trumbull seconded the motion. The motion carried unanimously (5-
0) with Chair Cook, Vice Chair Danaher, and Commissioners Forssell, Johnston, and Trumbull
voting yes and Commissioners Ballantine and Schwartz absent.
Commissioner Forssell made a motion that the UAC recommend that Council maintain the
current CLEAN price of 16.5 cents per kilowatt-hour (¢/kWh) for a 20-year or 25-year contract
term for a maximum of 3 MW of capacity and, for any capacity over 3 MW, reduce the price to
the avoided cost of such energy (8.9 ¢/kWh for a 20-year contract term, or 9.1 ¢/kWh for a 25-
year contract term) and remove the program limit of 3 MW for local solar resources. Chair Cook
seconded the motion. The motion carried (4-1) with Chair Cook, Vice Chair Danaher, and
Commissioners Forssell and Trumbull voting yes, Commissioner Johnston voting no and
Commissioners Ballantine and Schwartz absent. Commissioner Johnston said he voted no as he
supported the staff recommendation of reducing the price in tiers until 6 MW of capacity was
reached before moving to a price based on the avoided cost.